<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) FEBRUARY 3, 1998
-----------------------------
CYGNUS, INC.
- ------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
DELAWARE 0-18962 94-2978092
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
400 PENOBSCOT DRIVE, REDWOOD CITY, CALIFORNIA 94063-4719
- ------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (650) 369-4300
---------------------------
NOT APPLICABLE
- ------------------------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE>
Item 5 OTHER EVENTS
- ------ ------------
On February 3, 1998, Cygnus, Inc. (the "Company") entered into Note
Purchase Agreements with certain institutional investors to issue and sell
approximately $43 million of 4% Senior Subordinated Convertible Notes due 2005
(the ``Notes''). The Notes will be sold at par and mature on February 1, 2005
and bear interest at a rate of 4% per annum. Interest on the Notes may be paid
in Common Stock or cash at the option of the Company. The Notes are convertible
into Common Stock of the Company at a conversion price equal to the average of
the two lowest trade prices of the Common Stock as reported on the Nasdaq
National Market for a specified number of trading days immediately preceding the
conversion date until February 1, 2000. The conversion price will be subject to
maximum until February 1, 2000 and minimum conversion prices until February 1,
1999. Commencing February 1, 2000, the conversion price of the Notes will be
set at a fixed price equal to the greater of $150.00 per share and 150% of the
market price of the Common Stock for 20 trading days preceding such date.
The form of First Supplemental Indenture and Note Purchase Agreement
executed in connection with the Notes by the Company are attached hereto as
Exhibits 4.5 and 10.38, respectively, and are incorporated herein by reference.
Item 7 FINANCIAL STATEMENTS AND EXHIBITS
- ------ ---------------------------------
(c) Exhibits. The following documents are filed as exhibits to this
--------- report:
4.5 First Supplemental Indenture, dated as of February 3,
1998, to the Indenture dated as of February 3, 1998.
10.38 Form of Note Purchase Agreement, dated February 3, 1998,
by and between the Company and the Buyers named therein.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CYGNUS, INC.
(Registrant)
Date: February 4, 1998 By: /s/ John C. Hodgman
--------------------------------
John C. Hodgman
Title: Chief Financial Officer
<PAGE>
EXHIBIT INDEX
Exhibit Description
- ------- -----------
4.5 First Supplemental Indenture, dated as of February 3, 1998, to
the Indenture dated as of February 3, 1998.
10.38 Form of Note Purchase Agreement, dated February 3, 1998, by and
between the Company and the Buyers named therein.
<PAGE>
Exhibit 4.5
CYGNUS, INC.
TO
STATE STREET BANK AND TRUST COMPANY OF CALIFORNIA, N.A.,
AS TRUSTEE
____________
FIRST SUPPLEMENTAL INDENTURE
Dated as of February 3, 1998
____________
$43,000,000
4% Senior Subordinated Convertible Notes due 2005
____________
Supplemental to Indenture Dated as of February 3, 1998
<PAGE>
CYGNUS, INC.
TO
STATE STREET BANK AND TRUST COMPANY
OF CALIFORNIA, N.A., AS TRUSTEE
FIRST SUPPLEMENTAL INDENTURE
4% Senior Subordinated Convertible Notes due 2005
TABLE OF CONTENTS
PAGE
----
ARTICLE ONE
DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
Section 1.01. Definitions. . . . . . . . . . . . . . . . . . . . . . . .2
ARTICLE TWO
FORM OF NOTES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
Section 2.01. Form of Notes. . . . . . . . . . . . . . . . . . . . . . .11
Section 2.02. Form of Face of Notes. . . . . . . . . . . . . . . . . . .11
Section 2.03. Form of Reverse of Notes . . . . . . . . . . . . . . . . .13
Section 2.04. Form of Conversion Notice. . . . . . . . . . . . . . . . .17
ARTICLE THREE
THE NOTES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20
Section 3.01. Establishment of Series; Amount. . . . . . . . . . . . . .20
Section 3.02. Issuance of Common Stock in Lieu of Cash Interest. . . . .20
ARTICLE FOUR
REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22
Section 4.01. Events of Default. . . . . . . . . . . . . . . . . . . . .22
Section 4.02. Amounts Payable. . . . . . . . . . . . . . . . . . . . . .23
ARTICLE FIVE
COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23
Section 5.01. Transactions with Affiliates . . . . . . . . . . . . . . .23
Section 5.02. Reserved and Authorized Shares . . . . . . . . . . . . . .24
Section 5.03. Tender Offers. . . . . . . . . . . . . . . . . . . . . . .24
Section 5.04. Limitation on Indebtedness . . . . . . . . . . . . . . . .24
Section 5.05. Certain Payments . . . . . . . . . . . . . . . . . . . . .24
Section 5.06. Limitation on Certain Repurchases. . . . . . . . . . . . .24
ARTICLE SIX
REDEMPTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25
Section 6.01. Limitation on Shares Issuable on Conversion; Mandatory
Redemption . . . . . . . . . . . . . . . . . . . . . . . .25
Section 6.02. Form of Company Inconvertibility Notice. . . . . . . . . .27
Section 6.03. Form of Holder Inconvertibility Notice.. . . . . . . . . .28
Section 6.04. Form of Redemption Election. . . . . . . . . . . . . . . .29
Section 6.05. Redemption Based on Trading Above Maximum Conversion
Price . . . . . . . . . . . . . . . . . . . . . . . . . .30
Section 6.06. Form of Redemption Notice. . . . . . . . . . . . . . . . .31
Section 6.07. Redemption Based on Minimum Conversion Price . . . . . . .32
Section 6.08. Form of Minimum Conversion Price Redemption Notice . . . .33
Section 6.09. Other Redemption or Prepayment; Absence of Sinking Fund. .34
Section 6.10. Original Indenture . . . . . . . . . . . . . . . . . . . .34
i.
<PAGE>
ARTICLE SEVEN
REPURCHASE UPON A REPURCHASE EVENT . . . . . . . . . . . . . . . . . . . . . .34
Section 7.01. Repurchase Right . . . . . . . . . . . . . . . . . . . . .34
Section 7.02. Notices; Method of Exercising Repurchase Rights, Etc.. . .34
Section 7.03. Other. . . . . . . . . . . . . . . . . . . . . . . . . . .35
Section 7.04. Form of Company Notice . . . . . . . . . . . . . . . . . .35
Section 7.05. Form of Holder Notice. . . . . . . . . . . . . . . . . . .37
ARTICLE EIGHT
CONVERSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .38
Section 8.01. Conversion Right . . . . . . . . . . . . . . . . . . . . .38
Section 8.02. Authorization of Shares. . . . . . . . . . . . . . . . . .38
Section 8.03. Method of Conversion . . . . . . . . . . . . . . . . . . .39
Section 8.04. Limitation on Conversions. . . . . . . . . . . . . . . . .43
Section 8.05. Original Indenture . . . . . . . . . . . . . . . . . . . .43
ARTICLE NINE
SUNDRY PROVISIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .43
Section 9.01. Representations, Warranties and Covenants of the
Company. . . . . . . . . . . . . . . . . . . . . . . . . .43
Section 9.02. Trustee Not Responsible for Recitals . . . . . . . . . . .43
Section 9.03. Effect of Headings and Table of Contents . . . . . . . . .44
Section 9.04. Successors and Assigns . . . . . . . . . . . . . . . . . .44
Section 9.05. Separability Clause. . . . . . . . . . . . . . . . . . . .44
Section 9.06. Benefits of Supplemental Indenture . . . . . . . . . . . .44
Section 9.07. Governing Law. . . . . . . . . . . . . . . . . . . . . . .44
Section 9.08. Counterparts . . . . . . . . . . . . . . . . . . . . . . .44
Section 9.09. Enforceable Obligation . . . . . . . . . . . . . . . . . .44
Section 9.10. Certain Amounts. . . . . . . . . . . . . . . . . . . . . .45
Section 9.11. Amendments . . . . . . . . . . . . . . . . . . . . . . . .45
Section 9.12. Transfers of Notes . . . . . . . . . . . . . . . . . . . .45
Section 9.13. Reference to and Effect on Original Indenture. . . . . . .45
Section 9.14. Notices. . . . . . . . . . . . . . . . . . . . . . . . . .45
Section 9.15. Certain Adjustments. . . . . . . . . . . . . . . . . . . .46
Section 9.16. Defeasance . . . . . . . . . . . . . . . . . . . . . . . .48
Section 9.17. Subordination. . . . . . . . . . . . . . . . . . . . . . .48
ii.
<PAGE>
CYGNUS, INC.
TO
STATE STREET BANK AND TRUST COMPANY
OF CALIFORNIA, N.A., AS TRUSTEE
FIRST SUPPLEMENTAL INDENTURE
4% Senior Subordinated Convertible Notes due 2005
FIRST SUPPLEMENTAL INDENTURE, dated as of February 3, 1998, between
CYGNUS, INC., a corporation duly organized and existing under the laws of the
State of Delaware (herein called the "Company"), having its principal executive
office at 400 Penobscot Drive, Redwood City, California 94063-4719, and STATE
STREET BANK AND TRUST COMPANY OF CALIFORNIA, N.A., a national banking
association duly organized and existing under the laws of the United States of
America, as Trustee under the Original Indenture mentioned below (herein called
the "Trustee").
RECITALS OF THE COMPANY
The Company and the Trustee have heretofore entered into an
Indenture, dated as of February 3, 1998 (hereinafter called the "Original
Indenture") to provide, among other things, for the issuance from time to time
of Securities, unlimited as to principal amount, all as provided in the
Original Indenture.
The Securities authorized hereby are the first series of Securities
to be authorized under the Original Indenture.
Section 901 of the Original Indenture provides that, without the
consent of any Holders, the Company, when authorized by a Board Resolution, and
the Trustee, at any time or from time to time, may enter into one or more
indentures supplemental to the Original Indenture, in form satisfactory to the
Trustee, for the purpose of, among other things, establishing the form or terms
of Securities of any series as permitted by Sections 201 and 301 of the
Original Indenture.
The Company desires to issue from time to time its 4% Senior
Subordinated Convertible Notes due 2005, and to add to the provisions of the
Original Indenture certain provisions with respect to such Notes.
The entry into this Supplemental Indenture by the parties hereto is
in all respects authorized by the provisions of the Original Indenture.
All things necessary to make this Supplemental Indenture a valid
agreement of the Company in accordance with its terms have been done.
NOW, THEREFORE, THIS FIRST SUPPLEMENTAL INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the
Notes by the Holders thereof, it is mutually covenanted and agreed, for the
equal and proportionate benefit of all
1.
<PAGE>
Holders of the Notes, without preference, priority or distinction of any of
the Notes over any of the others by reason of priority in time of issuance or
otherwise, except as otherwise provided in the Original Indenture or this
Supplemental Indenture, as follows:
ARTICLE ONE
DEFINITIONS
SECTION 1.01. DEFINITIONS. (a) For all purposes of this
Supplemental Indenture, except as otherwise herein expressly provided or
unless the context otherwise requires:
(1) The terms defined in this Article have the meanings assigned
to them in this Article, and include the plural as well as the singular;
(2) terms used herein in capitalized form and defined in the
Original Indenture and not otherwise defined herein shall have the respective
meanings specified in the Original Indenture;
(3) the words "herein", "hereof" and "hereunder" and other words
of similar import used in this Supplemental Indenture refer to this
Supplemental Indenture as a whole and not to any particular Article, Section
or other subdivision of this Supplemental Indenture;
(4) the terms defined in the first paragraph of the Recitals of
the Company herein shall have the meanings specified therein;
(5) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted accounting
principles, and, except as otherwise herein expressly provided, the term
"generally accepted accounting principles" with respect to any computation
required or permitted hereunder shall mean such accounting principles as are
generally accepted in the United States at the date of such computation; and
(6) The following terms shall have the following meanings (such
meanings to be equally applicable to both the singular and plural forms of
the terms defined):
"Acceleration Premium" means 10%.
"Aggregated Person" means any person whose beneficial ownership of
shares of Common Stock would be aggregated with the Holder's beneficial
ownership of shares of Common Stock for purposes of Section 13(d) of the 1934
Act and Regulation 13D-G thereunder.
"AMEX" means the American Stock Exchange, Inc.
"Business Day" shall mean any day other than a Saturday, Sunday or
a day on which commercial banks in New York, New York, San Francisco,
California, and the city in which the Corporate Trust Office is located are
authorized or required by law or executive order to remain closed.
2.
<PAGE>
"Cash and Cash Equivalent Balances" of any Person on any date shall
be determined from such Person's books maintained in accordance with
generally accepted accounting principles, and means, without duplication, the
sum of (1) the cash accrued by such Person and its subsidiaries on a
consolidated basis on such date and available for use by such Person and its
subsidiaries on such date and (2) all assets which would, on a consolidated
balance sheet of such Person and its subsidiaries prepared as of such date in
accordance with generally accepted accounting principles, be classified as
cash or cash equivalents.
"Common Stock" shall mean the Common Stock, $.001 par value, of the
Company, together with the related Preferred Stock Purchase Rights (until
such time as such rights are no longer applicable or the Rights Agreement is
terminated) or similar rights of the Company applicable to the Common Stock
generally, or any shares of capital stock and the related rights into which
such class of stock or such rights shall be changed or reclassified after the
Issuance Date.
"Company Notice" means a Company Notice in the form set forth in
Section 7.04 of this Supplemental Indenture.
"Computed Price" means, for any date, the arithmetic average of the
Market Price of the Common Stock for the five consecutive Trading Days ending
one Trading Day prior to such date.
"Conversion Agent" means ChaseMellon Shareholder Services, L.L.C.,
and its successor or such other person who shall be serving as transfer agent
and registrar for the Common Stock and who shall have been authorized by the
Company to act as conversion agent for the Notes in accordance with the
Original Indenture, this Supplemental Indenture and the Conversion Agent
Agreement and the name, address and telephone number of whom shall have been
given to the Holders and the Trustee by notice from the Company.
"Conversion Agent Agreement" means the Conversion Agent Agreement
by and among the Company, the Conversion Agent and the Trustee for the
benefit of the Holders of the Notes.
"Conversion Notice" means a Notice of Conversion of 4% Senior
Subordinated Convertible Note due 2005 substantially in the form set forth in
Section 2.04 of this Supplemental Indenture, properly completed and duly
executed by a Holder of Notes or such Holder's attorney-in-fact.
"Conversion Price" means, for any date, the arithmetic average of
the lowest daily per share Trading Price on the two Trading Days on which the
two lowest daily per share Trading Prices occur during the applicable
Measurement Period for such date ; PROVIDED, HOWEVER, that in no event shall
the Conversion Price for any date be less than the Minimum Conversion Price
applicable to such date or more than the Maximum Conversion Price applicable
to such date regardless of the Conversion Price otherwise determined in
accordance herewith; PROVIDED FURTHER, HOWEVER, that in the case of any
Conversion Date on or after February 1, 2000, the Conversion Price shall be
the greater of (x) $150.00 and (y) an amount equal to 150% of the arithmetic
average of the Market Price of the Common Stock for the period of 20
consecutive Trading Days ending one
3.
<PAGE>
Trading Day prior to February 1, 2000.
"Default Interest" means interest at the Default Rate on any amount
payable under a Note which is not paid when due.
"Default Rate" means a rate per annum equal to the Prime Rate plus
2.5 percent (or such lesser rate equal to the highest rate permitted by
applicable law).
"Event of Default" shall have the meaning provided in Article Four.
"First Supplemental Indenture" or "this Supplemental Indenture"
means this instrument as originally executed or, if amended pursuant to the
applicable provisions of the Original Indenture, as amended or supplemented.
"Holder Notice" means a Holder Notice in the form set forth in
Section 7.05 of this Supplemental Indenture.
"Inconvertibility Conversion Price" means, for any date, the
Conversion Price which would be in effect on such date if no Trading Prices
on the two Trading Days otherwise used for computing the Conversion Price for
such date were so used and instead the lowest per share daily Trading Price
on the two other Trading Days during the applicable Measurement Period for
such date on which the third and fourth lowest per share daily Trading Prices
occur were used in computing the Conversion Price for such date.
"Inconvertibility Day" means any Trading Day on which (x) the
Company would not have been required to convert in accordance with Section
8.01 of this Supplemental Indenture any portion of any Note as a consequence
of the limitations set forth in Section 6.01(a) of this Supplemental
Indenture had the Holder of such Note converted such Note in full on such
Trading Day, determined at both the Conversion Price applicable on such
Trading Day and the Inconvertibility Conversion Price applicable on such
Trading Day (and, in the case of each of such determinations, without regard
to (i) the limitation, if any, on beneficial ownership by such Holder
contained in Section 8.01 of this Supplemental Indenture and (ii) whether
such Note is, by its terms, convertible on such Trading Day) or (y) on which
the Company does not have reserved from its authorized and unissued shares of
Common Stock for purposes of conversion of the Notes the number of shares so
required to be reserved pursuant to Section 5.02 of the Supplemental
Indenture.
"Inconvertibility Notice" means a notice from the Company to a
Holder of Notes in the form set forth in Section 6.02 of this Supplemental
Indenture or a notice from a Holder of Notes to the Company in the form set
forth in Section 6.03 of this Supplemental Indenture.
"Inconvertible Portion" means the greater of (1) the portion of a
Note (which, if applicable, shall be all of such Note) as shall not, on the
Trading Day immediately preceding the applicable Share Limitation Redemption
Date, be convertible into shares of Common Stock by reason of the limitations
set forth in Section 8.01(a) of this Supplemental Indenture (determined
without regard to the limitation, if any, on beneficial ownership contained
in Section 8.01(a) of this Supplemental Indenture and without regard to
whether such Note is, at such time, convertible in accordance with its
terms), or (2) the portion of a Note (which, if applicable, shall be all of
such
4.
<PAGE>
Note) as shall not, on the Trading Day immediately preceding the applicable
Share Limitation Redemption Date, be convertible into shares of Common Stock.
"Indebtedness" as used in reference to any Person means all
indebtedness of such person for borrowed money, the deferred purchase price
of property, goods and services and obligations under leases which are
required to be capitalized in accordance with generally accepted accounting
principles and shall include all such indebtedness guaranteed in any manner
by such person or in effect guaranteed by such person through a contingent
agreement to purchase and all indebtedness for the payment or purchase of
which such person has contingently agreed to advance or supply funds and all
indebtedness secured by mortgage or other lien upon property owned by such
person, although such person has not assumed or become liable for the payment
of such indebtedness, and, for all purposes hereof, such indebtedness shall
be treated as though it has been assumed by such person.
"Issuance Date" means the first date of issuance of any Notes.
"Lock-up Period" means a period which commences on the date
specified in a notice given by the Company as provided in Section 8.04 of
this Supplemental Indenture (which date shall be not more than ten or less
than five Trading Days subsequent to the date such notice is given) and ends
on the earlier of (1) the date which is 29 days after the date such period
commences and (2) the date the underwriters for the offering by reason of
which the Company has exercised its rights under Section 8.04 of this
Supplemental Indenture determine to break the underwriting syndicate for such
offering.
"Majority Holders" means at any time the holders of Notes which,
based on the original principal amount thereof, represent a majority of the
original aggregate principal amount of the Notes, whether or not outstanding
at such time.
"Market Price" of any security on any date shall mean the last
reported sale price (regular way) of such security on such date on Nasdaq or
such other securities exchange or other market on which such security is
listed for trading which constitutes the principal securities market for such
security, as reported by Bloomberg, L.P..
"Maximum Conversion Price" means, for any date, the price set forth
below with respect to such date:
Maximum
Date Conversion Price
---- ----------------
Issuance Date through the date which is 120 days
after the Issuance Date $22.50
121st through 360th day after the Issuance Date $25.00
On and after the 361st day after the Issuance Date $28.50
; PROVIDED, HOWEVER, that the prices set forth in this definition shall be
subject to equitable adjustment as provided in Section 9.15(a) of this
Supplemental Indenture.
5.
<PAGE>
"Maximum Share Amount" means 3,854,763 shares, such amount to be
subject to equitable adjustment from time to time as provided in Section
9.15(b) of this Supplemental Indenture.
"Measurement Period" means, (1) with respect to any date during the
period commencing on the Issuance Date and ending on the date which is 120
days after the Issuance Date, the period of nine consecutive Trading Days
ending one Trading Day prior to such date; (2) with respect to any date
during the period commencing on the date which is 121 days after the Issuance
Date and ending on the date which is 360 days after the Issuance Date, the
period of 13 consecutive Trading Days ending one Trading Day prior to such
date; and (3) with respect to any date on or after the date which is 361 days
after the Issuance Date, the period of 15 consecutive Trading Days ending one
Trading Day prior to such date; PROVIDED, HOWEVER, that, if on any Trading
Day during a Measurement Period determined in accordance with the preceding
clauses (1) through (3) there shall be no reported sale price (regular way)
of the Common Stock, then such Measurement Period shall be extended by one
Trading Day for each such Trading Day on which there shall be no such
reported sale price.
"Minimum Conversion Price" means, for any date, the price, if any,
set forth below with respect to such date:
Minimum
Date Conversion Price
---- ----------------
Issuance Date through the date which is 120 days
after the Issuance Date $20.00
121st through 360th day after the Issuance Date $13.00
On and after the 361st day after the Issuance Date none
; PROVIDED, HOWEVER, that the prices set forth in this provision shall be
subject to equitable adjustment as provided in Section 9.15(a) of this
Supplemental Indenture.
"Minimum Conversion Price Redemption Date" means the date which is
six Trading Days after a Minimum Conversion Price Redemption Notice is given
by the Company.
"Minimum Conversion Price Redemption Notice" means a Minimum
Conversion Price Redemption Notice in the form set forth in Section 6.08 of
this Supplemental Indenture which shall be deemed given on any date if given
prior to 8:30 a.m., New York City time, on such date.
"Minimum Conversion Price Redemption Price" means an amount in cash
equal to the sum of (1) the product obtained by multiplying (A) the principal
amount of a Note to be redeemed on the Minimum Conversion Price Redemption
Date TIMES (B) 110%, PLUS (2) accrued and unpaid interest on such principal
amount to the Minimum Conversion Price Redemption Date PLUS (3) accrued and
unpaid Default Interest, if any, on the amount referred to in the immediately
preceding clause (2) at the rate provided in the Notes to the Minimum
Conversion Price Redemption Date.
6.
<PAGE>
"NASD" means the National Association of Securities Dealers, Inc.
"Nasdaq" means the Nasdaq National Market.
"Net Cash and Cash Equivalent Balances" of any Person on any date
means the consolidated Cash and Cash Equivalent Balances of such Person and
its subsidiaries LESS the sum of (1) the amount of any outstanding
Indebtedness of such Person or any of its subsidiaries which, directly or
indirectly, is secured in whole or in part by, or on such date actually
restricts the use of, the consolidated Cash and Cash Equivalent Balances of
such Person and its subsidiaries PLUS (2) the maximum amount which is not
outstanding and which may be borrowed pursuant to any revolving credit
facility or any commitment to lend of or to such Person or any of its
subsidiaries which at the time it becomes outstanding will be secured in
whole or in part by, or will so restrict, Cash and Cash Equivalent Balances.
"1934 Act" means the Securities Exchange Act of 1934, as amended.
"Note Purchase Agreements" shall mean the several Note Purchase
Agreements, dated as of February 3, 1998, by and between the Company and the
original Holders of the Notes.
"NYSE" shall mean the New York Stock Exchange, Inc.
"Officer" means the Chairman of the Board, the Chief Executive
Officer, the President, any Senior Vice President or the Chief Financial
Officer of the Company.
"Payment Shares" shall mean the shares of Common Stock issued or to
be issued by the Company in payment of interest on the Notes in accordance
with Section 3.02 of this Supplemental Indenture.
"Permitted Indebtedness" means
(1) Indebtedness which is outstanding and which would be reflected on
consolidated balance sheet of the Company as of the Issuance Date prepared
in accordance with generally accepted accounting principles;
(2) Indebtedness owed to any bank or any non-bank Affiliate of a
bank, which Affiliate is engaged in the financing business;
(3) Indebtedness under any lease lines or other lease financing or
conditional sale arrangement;
(4) Indebtedness representing any financing of the purchase or
improvement of any real property or equipment or interest in real property
or equipment;
(5) Indebtedness which is subordinated to the Notes on terms no more
favorable to the holder of such subordinated debt than those on which the
Notes are subordinated to Senior Debt;
7.
<PAGE>
(6) Indebtedness which the Board of Directors determines, as set
forth in a Board Resolution, is necessary or appropriate to finance the
costs of manufacturing, marketing or commercialization of the Company's
products;
(7) Obligations of the Company or its Subsidiaries with respect to
letters of credit, banker's acceptances and similar facilities (including
reimbursement obligations);
(8) Obligations of the Company or its Subsidiaries with respect to
interest rate, and currency swaps, caps, floors, collars, forward contracts
and other hedging instruments;
(9) Obligations with respect to the deferred purchase price of
property and services (including trade payables); and
(10) Obligations of the nature listed in (1) to (9) above of another
Person which are guaranteed by or otherwise a contingent obligation of the
Company and the Subsidiaries.
"Permitted Transferee" means, with respect to any Note issued in
definitive form to any Person other than the Depository, any Person who is
(A) a Holder (provided that such Holder is an authorized Holder pursuant
hereto), (B) an Affiliate of any such Holder, and (C) any Person who has the
same principal investment adviser as, or whose principal investment adviser
is an Affiliate of the principal investment adviser to, any such Holder or
any Person identified in the preceding clauses (A) through (B), and in any
such case to whom Notes are being transferred which have a principal amount
equal to at least 20% of the principal amount of the Notes outstanding on the
date of such transfer, but in no event less than $1,500,000 (or equal to such
lesser principal amount of the Notes held by the transferring Holder at the
time of such transfer).
"Preferred Stock Purchase Rights" means the Preferred Stock
Purchase Rights issued or issuable pursuant to the Rights Agreement (or any
similar rights hereafter issued by the Company with respect to the Common
Stock).
"Prime Rate" means the rate per annum publicly announced by Silicon
Valley Bank from time to time as its prime rate (which shall not necessarily
be the lowest rate of interest offered by such bank for loans to its
customers) with each change therein to be effective hereunder at the time of
announcement of such change by such bank.
"Quarterly Cash Requirements" on any date means the consolidated
net cash used in operating activities of the Company and the Subsidiaries for
the most recent fiscal quarter for which, at such date, the Company has
published a consolidated statement of cash flows, prepared in accordance with
generally accepted accounting principles, as shown on such statement.
"Redemption Date" means the date on which the Company is required
to redeem the Notes in accordance with the exercise of its right to do so as
provided in Section 6.05 of this Supplemental Indenture.
"Redemption Election" means (1) a notice by a Holder of Notes to
the Company substantially in the form set forth in Section 6.04 of this
Supplemental Indenture or (2) a notice by a Holder of Notes to the Company
included in the form of Inconvertibility Notice set forth in Section
8.
<PAGE>
6.03 of this Supplemental Indenture.
"Redemption Election Period" means, with respect to a particular
Inconvertibility Day, the period of ten Business Days after the later of (x)
the date an Inconvertibility Notice with respect to such Inconvertibility Day
is given or (y) the date such Inconvertibility Notice was required to have
been given by the Company.
"Redemption-Free Conversion Amount" means, with respect to any
Note, in the case of any redemption of Notes pursuant to Section 6.07, a
portion of the principal amount of such Note equal to 20% of the principal
amount of such Note outstanding at the close of business on the date
immediately preceding the date on which the Company gives the Minimum
Conversion Price Redemption Notice with respect to such redemption and the
accrued and unpaid interest thereon, including Default Interest.
"Redemption Notice" means a Redemption Notice in the form set forth
in Section 6.06 of this Supplemental Indenture.
"Redemption Price" means, with respect to each Note, an amount
equal to the sum of (1) the outstanding principal amount of such Note on the
Redemption Date PLUS (2) accrued and unpaid interest on such Note to the
Redemption Date PLUS (3) accrued and unpaid Default Interest on the amount
referred to in the immediately preceding clause (2) to the Redemption Date.
"Repurchase Event" means the occurrence of any one or more of the
following events:
(a) For any period of seven consecutive Trading Days following the
date hereof there shall be no reported sale price of the Common Stock on
any of Nasdaq, the NYSE or the AMEX;
(b) Any consolidation or merger of the Company or any Subsidiary of
the Company with or into another entity or other business combination
transaction involving the Company or any Subsidiary (other than a merger or
consolidation of a Subsidiary into the Company or a wholly owned
Subsidiary) where the stockholders of the Company immediately prior to such
transaction do not, immediately following such transaction, collectively
own at least 51% of the outstanding voting securities of the surviving
corporation of such consolidation, merger or other business combination
transaction (or at least 51% of the outstanding voting securities of the
Company in the case of any such consolidation, merger or transaction in
which a Subsidiary is a merging or consolidating entity and the Company is
not a merging or consolidating entity); or the sale of all or substantially
all of the assets of the Company and the Subsidiaries;
(c) The adoption of any amendment to the Company's Certificate of
Incorporation (other than any certificate designating a series of preferred
stock of the Company) which materially and adversely affects the rights of
the Holders of the Notes in respect of its interest in the Common Stock in
a different and more adverse manner than it affects the rights of holders
of Common Stock generally or the taking of any other action which
materially and adversely affects the rights of the Holders of the Notes; or
9.
<PAGE>
(d) The occurrence of any Event of Default specified in Article Four
of this Supplemental Indenture if an Event of Default is continuing on the
date a Holder Notice is given.
"Repurchase Percentage" means 110%.
"Repurchase Price" means an amount equal to the sum of (1) the product
obtained by multiplying (A) the outstanding principal amount of the Note to be
repurchased pursuant to Article Seven of this Supplemental Indenture TIMES
(B) the Repurchase Percentage, PLUS (2) accrued and unpaid interest on such
principal amount to the date of such repurchase PLUS (3) accrued and unpaid
Default Interest, if any, on the amount referred to in the immediately preceding
clause (2) at the rate provided in the Notes to the date of repurchase.
"Rights Agreement" means the Rights Agreement, dated as of September
21, 1993, by and between the Company and ChaseMellon Shareholder Services
L.L.C., as Rights Agent, as amended.
"SEC" means the Securities and Exchange Commission.
"Share Limitation Redemption Date" means a date on which the Company
is required to redeem all or any portion of any Note as provided in Section
6.01.
"Share Limitation Redemption Percentage" means 110%.
"Share Limitation Redemption Price" means an amount in cash equal to
the sum of (1) the product obtained by multiplying (A) the principal amount of a
Note to be redeemed on a particular Share Limitation Redemption Date TIMES (B)
the Share Limitation Redemption Percentage, PLUS (2) accrued and unpaid interest
on such principal amount to such Share Limitation Redemption Date PLUS
(3) accrued and unpaid Default Interest, if any, on the amount referred to in
the immediately preceding clause (2) at the rate provided in the Notes to such
Share Limitation Redemption Date.
"Shares" means the shares of Common Stock issuable upon conversion of
the Note and the Payment Shares.
"Stock Payment Option" means the option of the Company to make a
payment of interest on the Notes wholly or partly in shares of Common Stock as
provided in 3.02.
"Stockholder Approval" means the approval of the issuance by the
Company of Common Stock on conversion of the Note as and to the extent required
under Rule 4460(i) of Nasdaq (or any successor, replacement or other similar
provision applicable to the Company).
"Tender Offer" means a tender offer or exchange offer.
"Trading Day" means a day on which either the national securities
exchange or Nasdaq which then constitutes the principal securities market on
which the Common Stock is listed for trading is open for general trading of
securities, other than any day on which general trading of securities on such
exchange or market is curtailed or suspended based on fluctuations in
10.
<PAGE>
stock market averages or stock market indices.
"Trading Price" on any date means the lowest per share sale price
(regular way) for the Common Stock on such date (and, in the case of the use of
the term Trading Price to determine the Conversion Price in connection with any
conversion of a Note by the Holder thereof, in a trade in which neither such
Holder nor any of its Affiliates is a buyer or a seller), on the first
applicable among the following: (a) the national securities exchange on which
the shares of Common Stock are listed which constitutes the principal securities
market for the Common Stock or (b) Nasdaq, in either case as reported by
Bloomberg, L.P. (subject during any Measurement Period to equitable adjustment
from time to time as provided in Section 9.15(a) of this Supplemental Indenture
for events occurring or for which "ex-" trading commences during such
Measurement Period).
"Tranche 1 Note" means any Note which, at the time of its
authentication by the Trustee, bears a notation that such Note is a Tranche 1
Note as provided in Sections 2.01 and 8.01 of this Supplemental Indenture.
"Tranche 2 Note" means any Note which, at the time of its
authentication by the Trustee, bears a notation that such Note is a Tranche 2
Note as provided in Sections 2.01 and 8.01 of this Supplemental Indenture.
"Transaction Documents" means this Supplemental Indenture, the Notes,
the Note Purchase Agreements, the Conversion Agent Agreement and the other
agreements, instruments and documents contemplated hereby and thereby.
(e) All the agreements or instruments herein defined shall mean such
agreements or instruments as the same may from time to time be supplemented or
amended or the terms thereof waived or modified to the extent permitted by, and
in accordance with, the terms thereof and of the Original Indenture, this
Supplemental Indenture and the Notes.
ARTICLE TWO
FORM OF NOTES
SECTION 2.01. FORM OF NOTES. The Notes shall be in substantially the
form set forth in this Article, with such appropriate insertions, omissions,
substitutions and other variations as are required or permitted by the Original
Indenture and this Supplemental Indenture, and may have such other letters,
numbers or other marks of identification and such legends or endorsements placed
thereon as may be required to comply with the rules of any securities exchange
or Depositary therefor or as may, consistently herewith, be determined by the
officers executing the Notes, as evidenced by their execution thereof. Upon
original issuance of Notes, Notes having a principal amount equal to one-half of
the principal amount issued to each Holder shall be designated as Tranche 1
Notes and Notes having a principal amount equal to one-half of the principal
amount issued to each Holder shall be designated as Tranche 2 Notes in order to
give effect to the limitations in Section 8.01 hereof regarding the earliest
date on which Notes are convertible in accordance therewith.
SECTION 2.02. FORM OF FACE OF NOTES.
11.
<PAGE>
CYGNUS, INC.
No. $
--------------- ------------
Tranche No. Maximum Share Amount
-------------- ------------
Cygnus, Inc., a corporation duly organized and existing under the
laws of Delaware (herein called the "Company," which term includes any
successor Person under the Original Indenture hereinafter referred to), for
value received, hereby promises to pay to _______________________ , or
registered assigns, the principal sum of ________________ Dollars (or such
lesser principal amount of this Note as is outstanding on the date of
payment) on February 1, 2005, and to pay interest thereon from February 3,
1998 or from the most recent Interest Payment Date to which interest has been
paid or duly provided for, on December 15 in each year, commencing December
15, 1998, and at the Maturity of this Note, at the rate of 4% per annum,
until the principal hereof is paid or made available for payment, provided
that any installment of interest, which is overdue shall bear interest at a
rate per annum equal to the Prime Rate in effect from time to time plus 2.5%
(to the extent that the payment of such interest shall be legally
enforceable), from the dates such amounts are due until they are paid or made
available for payment, and such interest shall be payable on demand. The
interest so payable, and punctually paid or duly provided for, on any
Interest Payment Date will, as provided in the Supplemental Indenture, be
paid to the Person in whose name this Security (or one or more Predecessor
Securities) is registered at the close of business on the Regular Record Date
for such interest, which shall be the Business Day next preceding such
Interest Payment Date. Any such interest not so punctually paid or duly
provided for will forthwith cease to be payable to the Holder on such Regular
Record Date and may either be paid to the Person in whose name this Security
(or one or more Predecessor Securities) is registered at the close of
business on a Special Record Date for the payment of such Defaulted Interest
to be fixed by the Trustee, notice whereof shall be given to Holders of
Securities of this series not less than ten days prior to such Special Record
Date, or be paid at any time in any other lawful manner not inconsistent with
the requirements of any securities exchange on which the Securities of this
series may be listed, and upon such notice as may be required by such
exchange, all as more fully provided in the Original Indenture and the
Supplemental Indenture.
Payment of the principal of (and premium, if any) and any such
interest on this Security will be made at the office or agency of the Company
maintained for that purpose in the city in which the Corporate Trust Office
is located, in such coin or currency of the United States of America as at
the time of payment is legal tender for payment of public and private debts
or, at the option of the Company and subject to the provisions of this Note,
interest payable on the Interest Payment Dates may be paid in whole or in
part in fully paid and nonassessable shares of Common Stock; PROVIDED,
HOWEVER, that at the option of the Company payment of interest may be made by
check mailed to the address of the Person entitled thereto as such address
shall appear in the Security Register; PROVIDED FURTHER, HOWEVER, that cash
payments shall be made by wire transfer of immediately available funds to
such account within the United States of America as the Holder may from time
to time designate by notice to the Company in accordance with the Indenture.
Reference is hereby made to the further provisions of this Security set forth
on the reverse hereof, which further provisions shall for all purposes have
the same effect as if set forth at this place.
12.
<PAGE>
The obligations of the Company under this Note are subordinated on the
terms set forth in the Original Indenture.
Unless the certificate of authentication hereon has been executed by
the Trustee referred to on the reverse hereof by manual signature, this
Security shall not be entitled to any benefit under the Original Indenture or
the Supplemental Indenture or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be
duly executed under its corporate seal.
Dated:
------------------
CYGNUS, INC.
By:
-------------------------------
Title:
--------------------------
Attest:
-----------------
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
STATE STREET BANK AND TRUST OF CALIFORNIA, N.A., as Trustee, certifies that this
is one of the Securities referred to in the within-mentioned Original Indenture.
STATE STREET BANK AND TRUST
COMPANY OF CALIFORNIA, N.A., as Trustee
By:
---------------------------
Authorized Officer
Date of Authentication: February 3, 1998
SECTION 2.03. FORM OF REVERSE OF NOTES. This Security is one of a
duly authorized issue of securities of the Company (herein called the
"Securities"), issued and to be issued in one or more series under an
Original Indenture, dated as of February 3, 1998 (herein called the "Original
Indenture," which term shall have the meaning assigned to it in such
instrument), between the Company and State Street Bank and Trust Company of
California, N.A., as Trustee (herein called the "Trustee," which term
includes any successor trustee under the Original Indenture) and the
Supplemental Indenture, dated as of February 3, 1998, between the Company and
the Trustee (herein called the "Supplemental Indenture," which term shall
have the meaning assigned to it in
13.
<PAGE>
such instrument), and reference is hereby made to the Original Indenture, the
Supplemental Indenture and all indentures supplemental thereto for a
statement of the respective rights, limitations of rights, duties and
immunities thereunder of the Company, the Trustee and the Holders of the
Securities and of the terms upon which the Securities are, and are to be,
authenticated and delivered. This Security is one of the series designated on
the face hereof, limited in aggregate principal amount to $43,000,000 (except
as otherwise provided in the Original Indenture and the Supplemental
Indenture).
The Securities of this series are subject to redemption in whole or in
part on one occasion upon not less than 25 Trading Days' notice by telephone
line facsimile transmission to the Holder at such telephone line facsimile
transmission number as shall have been provided by the Holder to the Company for
such purpose (or, if no such telephone line facsimile transmission number shall
have been so provided by the Holder, by first class mail or such other means
permitted by the Supplemental Indenture), at any time on or after February 1,
1999 at a Redemption Price equal to 100% of the outstanding principal amount
PLUS accrued and unpaid interest to the Redemption Date if the Market Price of
the Common Stock for any period of 20 consecutive Trading Days ending on or
after February 1, 1999 is at least equal to 150% of the Maximum Conversion Price
in effect at such time, but interest installments whose Stated Maturity is on or
prior to such Redemption Date will be payable to the Holders of such Securities
of record at the close of business on the relevant Record Dates referred to on
the face hereof, all as provided in the Original Indenture and the Supplemental
Indenture.
The Securities of this series are subject to redemption on six Trading
Days' notice by telephone line facsimile transmission to the Holder at such
telephone line facsimile transmission number as shall have been provided by the
Holder to the Company for such purpose (or, if no such telephone line facsimile
transmission number shall have been so provided by the Holder, by first class
mail or such other means permitted by the Supplemental Indenture), at any time
on or after February 1, 1999 (subject to extension of such date as provided in
the Supplemental Indenture) at the Minimum Conversion Price Redemption Price
equal to 110% of the sum of the outstanding principal amount PLUS accrued and
unpaid interest to the Minimum Conversion Price Redemption Date (plus any
Default Interest on the accrued and unpaid interest) if the Market Price on any
date on or after February 1, 1999 is less than $12.50 (subject to equitable
adjustment from time to time as provided in Section 9.15(a) of the Supplemental
Indenture) per share of Common Stock, but interest installments whose Stated
Maturity is on or prior to such Minimum Conversion Price Redemption Date will be
payable to the Holders of such Securities of record at the close of business on
the relevant Record Dates referred to on the face hereof, all as provided in the
Original Indenture and the Supplemental Indenture. Notwithstanding any such
notice of redemption, the Holder shall be entitled to convert an amount of
principal of this Security, up to the Redemption-Free Conversion Amount, PLUS
accrued interest thereon, at any time on or prior to the Minimum Conversion
Price Redemption Date for such redemption.
The Securities of this series are subject to redemption on three
Trading Days' notice by telephone line facsimile transmission to the Holder at
such telephone line facsimile transmission number as shall have been provided by
the Holder to the Company for such purpose (or, if no such telephone line
facsimile transmission number shall have been so provided by the Holder, by
first class mail), at any time on or after February 1, 2000 at 100% of the
principal amount outstanding plus accrued and unpaid interest to the date for
redemption specified by the Company in its notice of such redemption (plus any
Default Interest).
14.
<PAGE>
In the event of redemption of this Security in part only, a new
Security or Securities of this series and of like tenor for the unredeemed
portion hereof will be issued in the name of the Holder hereof upon the
cancellation hereof.
The Original Indenture and the Supplemental Indenture contain
provisions for defeasance at any time of certain restrictive covenants, Events
of Default or other circumstances with respect to this Security upon compliance
with certain conditions set forth in the Original Indenture and the Supplemental
Indenture.
Subject to the provisions of the Original Indenture, the Holder of
this Security is entitled, at its option, (1) if this is a Security of
Tranche 1 of this series, at any time on or before the close of business on
January 31, 2005 and (2) if this is a Security of Tranche 2 of this series,
at any time on or after the close of business on May 1, 1998 and before the
close of business on January 31, 2005 (except that, in case this Security or
any portion hereof shall be called for redemption, such right shall terminate
with respect to this Security or portion hereof, as the case may be, so
called for redemption at the close of business on the first Business Day
preceding the date fixed for redemption as provided in the Original Indenture
and the Supplemental Indenture unless the Company defaults in making the
payment due upon redemption), to convert the principal amount of this
Security (or any portion hereof which is at least equal to $25,000 (or such
lesser outstanding amount of this Security)) plus an amount equal to accrued
and unpaid interest on this Security to the date of conversion, into fully
paid and non-assessable shares (calculated as to each conversion to the
nearest 1/100th of a share) of the Common Stock of the Company, as said
shares shall be constituted at the date of conversion, at the Conversion
Price for each share of Common Stock in effect at the date of conversion
determined as provided in the Original Indenture or the Supplemental
Indenture, upon the delivery of the conversion notice hereon duly executed,
to the Company at the designated office or agency of the Company in the city
in which the Corporate Trust Office is located or the city in which the
office of the Conversion Agent is located. Upon such conversion, no
adjustment is to be made for interest accrued hereon or for dividends on
shares of Common Stock issued on conversion. The Company is not required to
issue fractional shares upon any such conversion, but shall make adjustment
therefor in cash on the basis of the current market value of such fractional
interest or may round up the number of shares of Common Stock issued on
conversion as provided in the Original Indenture and the Supplemental
Indenture. The Conversion Price is subject to adjustment as provided in the
Original Indenture and the Supplemental Indenture. In addition, the
Indenture provides that in case of certain consolidations or mergers to which
the Company is a party or the sale of substantially all of the assets of the
Company or certain share exchanges involving the Company, the Indenture shall
be amended, without the consent of any Holders of Securities, so that this
Security, if then outstanding, will be convertible thereafter, during the
period this Security shall be convertible as specified above, on the basis
provided in the Indenture. In the event of conversion of this Security in
part only, if the Holder elects to surrender this security in connection
therewith, a new Security or Securities for the unconverted portion hereof
shall be issued in the name of the Holder hereof upon the cancellation hereof.
If an Event of Default with respect to Securities of this series shall
occur and be continuing, the principal of and premium on the Securities of this
series may be declared due and payable in the manner and with the effect
provided in the Original Indenture.
15.
<PAGE>
The Original Indenture permits, with certain exceptions as therein
provided, the amendment thereof and the modification of the rights and
obligations of the Company and the rights of the Holders of the Securities of
each series to be affected under the Original Indenture at any time by the
Company and the Trustee with the consent of the Holders of more than 50% in
principal amount of the Securities at the time Outstanding of each series to
be affected. The Original Indenture also contains provisions permitting the
Holders of specified percentages in principal amount of the Securities of
each series at the time Outstanding, on behalf of the Holders of all
Securities of such series, to waive compliance by the Company with certain
provisions of the Original Indenture and the Supplemental Indenture and
certain past defaults under the Original Indenture and the Supplemental
Indenture and their consequences. Any such consent or waiver by the Holder of
this Security shall be conclusive and binding upon such Holder and upon all
future Holders of this Security and of any Security issued upon the
registration of transfer hereof or in exchange herefor or in lieu hereof,
whether or not notation of such consent or waiver is made upon this Security.
As provided in and subject to the provisions of the Original
Indenture, the Holder of this Security shall not have the right to institute
any proceeding with respect to the Original Indenture or for the appointment
of a receiver or trustee or for any other remedy thereunder, unless such
Holder shall have previously given the Trustee written notice of a continuing
Event of Default with respect to the Securities of this series, the Holders
of not less than 25% in principal amount of the Securities of this series at
the time Outstanding shall have made written request to the Trustee to
institute proceedings in respect of such Event of Default as Trustee and
offered the Trustee reasonable indemnity, and the Trustee shall not have
received from the Holders of a majority in principal amount of Securities of
this series at the time Outstanding a direction inconsistent with such
request, and shall have failed to institute any such proceeding, for 60 days
after receipt of such notice, request and offer of indemnity. The foregoing
shall not apply to any suit instituted by the Holder of this Security for the
enforcement of any payment of principal hereof or any premium or interest
hereon on or after the respective due dates expressed herein.
No reference herein to the Original Indenture or the Supplemental
Indenture and no provision of this Security or of the Original Indenture or
the Supplemental Indenture shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the principal of and any
premium and interest on this Security at the times, place and rate, and in
the coin or currency, herein prescribed.
As provided in the Original Indenture and the Supplemental
Indenture and subject to certain limitations therein set forth, the transfer
of this Security is registrable in the Security Register, upon surrender of
this Security for registration of transfer at the office or agency of the
Company in any place where the principal of and any premium and interest on
this Security are payable, duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Company and the Security
Registrar duly executed by, the Holder hereof or its attorney duly authorized
in writing, and thereupon one or more new Securities of this series and of
like tenor, of authorized denominations and for the same aggregate principal
amount, will be issued to the designated transferee or transferees. THE
HOLDER IS SUBJECT TO RESTRICTIONS ON TRANSFER OF THIS SECURITY PURSUANT TO
THE SUPPLEMENTAL INDENTURE AND THE APPLICABLE NOTE PURCHASE AGREEMENT.
The Securities of this series are issuable only in registered form
without coupons.
16.
<PAGE>
As provided in the Original Indenture and the Supplemental Indenture and
subject to certain limitations therein set forth, Securities of this series
are exchangeable for a like aggregate principal amount of Securities of this
series and of like tenor of a different authorized denomination, as requested
by the Holder surrendering the same.
No service charge shall be made to a Holder for any such registration
of transfer or exchange, but the Company may require payment of a sum sufficient
to cover any tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Security for registration of
transfer, the Company, the Trustee and any agent of the Company or the Trustee
may treat the Person in whose name this Security is registered as the owner
hereof for all purposes, whether or not this Security be overdue, and neither
the Company, the Trustee nor any such agent shall be affected by notice to the
contrary.
All terms used in this Security which are defined in the Supplemental
Indenture shall have the meanings assigned to them in the Supplemental
Indenture.
SECTION 2.04. FORM OF CONVERSION NOTICE.
NOTICE OF CONVERSION OF
4% SENIOR SUBORDINATED CONVERTIBLE NOTE DUE 2005
OF CYGNUS, INC.
To: Chase Mellon Shareholder Services L.L.C.,
as Conversion Agent
235 Montgomery Street, 23rd Floor
San Francisco, CA 94104
Attention: Mr. Asa Drew
Facsimile No.: (415) 989-5241
and
State Street Bank and Trust Company of California, N.A.,
as Trustee
725 South Figueroa Street, Suite 3100
Los Angeles, CA 90017
Attention: Mr. Scott Emmons
Facsimile No.: (213) 362-7357
(1) Pursuant to the terms of the 4% Senior Subordinated
Convertible Note due 2005 (the "Note"), held by the undersigned (the
"Holder"), the Holder hereby elects to convert $ ___________ of the Note,
equal to the sum of $___________ principal amount of the Note PLUS
17.
<PAGE>
$___________ of accrued and unpaid interest on such principal amount PLUS
$__________ of Default Interest on such interest into shares of Common Stock
of Cygnus, Inc., a Delaware corporation (the "Company"), at a Conversion
Price per share equal to $___________ . Capitalized terms used herein and
not otherwise defined herein have the respective meanings provided in the
Note, the Original Indenture and the Supplemental Indenture.
(2) The number of shares of Common Stock issuable upon the conversion
of the Note to which this Notice relates is ________________.
(3) (a) If the conversion of the Note by this Notice is based on the
Trading Prices during a Measurement Period, set forth below or on a schedule
which accompanies this Notice are the Trading Prices during the Measurement
Period applicable to this Notice and an indication of the two Trading Prices
used to determine the Conversion Price set forth above.
Date Trading Price
---- -------------
1. , $
----------------- ----- -----------------
2. , $
----------------- ----- -----------------
3. , $
----------------- ----- -----------------
4. , $
----------------- ----- -----------------
5. , $
----------------- ----- -----------------
6. , $
----------------- ----- -----------------
7. , $
----------------- ----- -----------------
8. , $
----------------- ----- -----------------
9. , $
----------------- ----- -----------------
10. , $
----------------- ----- -----------------
11. , $
----------------- ----- -----------------
12. , $
----------------- ----- -----------------
13. , $
----------------- ----- -----------------
14. , $
----------------- ----- -----------------
15. , $
----------------- ----- -----------------
(b) The Holder hereby represents to the Company that (a)
neither the Holder nor any of its Affiliates was the buyer or seller in the
trades of shares of Common Stock listed
18.
<PAGE>
above on which the Conversion Price applicable to this Notice is based and
(b) to the actual knowledge of the Holder, based on no investigation by the
Holder, neither any other Holder of Notes nor any Affiliate of any other
Holder of Notes was the buyer or seller in the trades of shares of Common
Stock listed above on which the Conversion Price applicable to this Notice is
based.
(c) The Holder is submitting with this Notice a print-out
from Bloomberg, L.P. which shows the trading data on which Trading Prices
shown above are based, unless such print-out was not reasonably available to
the Holder, in which case the Holder will use commercially reasonable efforts
to furnish such print-out to the Company on or before the date that is at
least two Trading Days after this Notice is given.
(d) The Holder will use commercially reasonable efforts to
give oral confirmation to the Company of the authenticity of this Notice by
attempting to contact by telephone the person designated from time to time
for such purposes by the Company to the Holder at such telephone number as
provided by the Company.
(4) Please issue a certificate or certificates for ______ shares of
Common Stock in the name(s) specified immediately below or, if additional
space is necessary, on an attachment hereto:
____________________________ ____________________________
Name Name
____________________________ ____________________________
Address Address
____________________________ ____________________________
SS or Tax ID Number SS or Tax ID Number
Delivery Instructions
for Common Stock: ____________________________
____________________________
____________________________
If the Person in whose name any shares of Common Stock are to be issued is
other than the Holder, pursuant to the Supplemental Indenture, the Company is
not required to issue or deliver such shares unless and until the Holder
shall have paid to the Company the amount of any tax which may be payable in
respect of any transfer involved in such issuance of shares of Common Stock
or shall have established to the satisfaction of the Company that such tax
has been paid.
(5) The Holder hereby represents to the Company that the
exercise of conversion rights contained herein does not violate the
provisions of Article Eight of the Supplemental Indenture relating to
beneficial ownership in excess of 4.9% of the Common Stock.
19.
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NAME: ____________________________
Date _________________________ ___________________________________
Signature of Registered Holder
(Must be signed exactly as name
appears in the Note.)
ARTICLE THREE
THE NOTES
SECTION 3.01. ESTABLISHMENT OF SERIES; AMOUNT. There is hereby
established a series of Securities entitled "4% Senior Subordinated
Convertible Notes due 2005," which shall be limited in aggregate principal
amount to $43,000,000. The Notes shall bear interest at the rate provided in
the form of Notes and interest on the Notes shall be payable annually on the
Interest Payment Dates specified in the form of Notes to the Persons who are
Holders of the Notes at the close of business on the Business Day immediately
preceding each Interest Payment Date. The Notes shall not be Original Issue
Discount Securities.
SECTION 3.02. ISSUANCE OF COMMON STOCK IN LIEU OF CASH INTEREST.
(a) If the Company exercises the Stock Payment Option, the issuance of
Payment Shares upon such exercise of the Stock Payment Option shall have been
authorized by the Board of Directors of the Company.
(b) The Company shall not be permitted to exercise the Stock
Payment Option with respect to any payment of interest on the Notes if:
(i) the number of shares of Common Stock authorized, unissued and
unreserved for all purposes, or held in the Company's treasury, is
insufficient to pay the portion of such interest to be paid in Common
Stock;
(ii) the issuance or delivery of Payment Shares or the public resale
of such Payment Shares is prohibited or restricted by any governmental
authority under any law or regulation;
(iii) the Payment Shares shall not at the time of issuance have
been authorized for listing, upon official notice of issuance, on the
principal securities exchange on which the Common Stock is then listed and
traded;
(iv) the Computed Price for the Payment Shares is less than the par
value of the Common Stock;
(v) an Event of Default has occurred and is continuing or a
Repurchase Event shall have occurred with respect to which the Holders of
the Notes have the right to exercise repurchase rights pursuant to Article
Seven of this Supplemental Indenture or with respect to which any Holder of
Notes shall have exercised such repurchase rights and the Company
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shall not have paid the Repurchase Price to such Holder; or
(vi) the Common Stock is neither (i) listed or admitted for trading
on a national securities exchange nor (ii) quoted on Nasdaq.
(c) The Company shall elect the Stock Payment Option with respect
to a particular Interest Payment Date by giving notice of such election to
the Holders of the Notes and the Trustee at least ten days in advance of such
Interest Payment Date, which notice shall set forth the portion, if less than
all, of the interest payable on the Notes on such Interest Payment Date which
is to be paid in Payment Shares. If the Stock Payment Option is elected, the
Company shall issue and deliver or cause to be delivered to each Holder of
Notes one or more certificates for the aggregate number of whole shares of
Common Stock determined by dividing the per share Computed Price of the
Common Stock on the applicable Interest Payment Date into the total amount of
lawful money of the United States of America which such Holder would receive
if the aggregate amount of interest on the Note held by such Holder which is
being paid in shares of Common Stock were being paid in such lawful money;
PROVIDED, HOWEVER, that if in connection with any such election the Company
shall have failed to notify the Holders of the Notes and the Trustee at least
ten days before the particular Interest Payment Date that the Company has
elected to use the Stock Payment Option with respect to such Interest Payment
Date as required hereby or to deliver the appropriate number of shares of
Common Stock to the Holder within three Trading Days after the applicable
Interest Payment Date, then the Company shall not be entitled to use the
Stock Payment Option in respect of such Interest Payment Date, such cash
interest shall be immediately due and payable and the Company shall pay the
interest for such Interest Payment Date in cash with Default Interest, at the
rate provided in the Notes, from such Interest Payment Date until paid. No
fractional shares will be issued in payment of interest on the Notes. In
lieu thereof, the Company may, at its option, issue a number of shares of
Common Stock which reflects a rounding up to the next whole number or may pay
lawful money of the United States of America in lieu of issuance of such
fractional share.
(d) If the Company exercises the Stock Payment Option with respect
to a payment of interest on the Notes, the Company shall give to each Holder
of Notes and the Trustee, on or prior to the date on which Payment Shares for
such payment of interest on the Notes are to be received by such Holder, a
Company Certificate setting forth (i) the total amount of the interest
payment to which such Holder is entitled, (ii) the portion of the interest
payment being made in Payment Shares, (iii) the number of Payment Shares
allocable to such payment, as calculated pursuant to this Section 3.02, (iv)
the amount of any rounding adjustment to such number or any payment necessary
to be made pursuant to Section 3.02(c), and (v) a statement that none of the
conditions set forth in Section 3.02(b) has occurred and is existing. The
certificates for the Payment Shares shall be duly issued in the name of each
Holder of Notes or its nominee, representing the Payment Shares. Such
Company Certificate shall be conclusive evidence of the correctness of the
calculation of the number of Payment Shares allocable to the payments to
which such Company Certificate relates and of any adjustments to such number
made pursuant to this Section 3.02 in the absence of manifest error. In
addition, on or before the Interest Payment Date, the Company shall cause the
transfer agent for the Common Stock to prepare the certificates representing
the Payment Shares in the name of each Holder before being so delivered by
the Company on the due date for delivery thereof to the Holders of the Notes.
(e) The Payment Shares, when issued pursuant to and in compliance
with this
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Section 3.02, shall be, and for all purposes shall be deemed to be, validly
issued, fully paid and nonassessable shares of Common Stock; the issuance and
delivery thereof has been in all respects authorized; and the issuance
thereof, together with lawful money of the United States of America, if any,
paid in lieu of fractional shares of such Common Stock, will be, and for all
purposes shall be deemed to be, in full discharge and satisfaction of the
Company's obligation to pay the interest on the Notes to which such Payment
Shares relate.
ARTICLE FOUR
REMEDIES
SECTION 4.01. EVENTS OF DEFAULT. "Event of Default," whenever
used in the Original Indenture or this Supplemental Indenture with respect to
the Notes, means any of the following events if such event occurs on or prior
to February 1, 2000:
(1) default in the payment of any interest upon any Note when it
becomes due and payable and continuance of such default for a period of 15
days; or
(2) any representation or warranty of the Company made in the Note
Purchase Agreements, the Notes, the Original Indenture or this Supplemental
Indenture or in any agreement, statement or certificate given in writing
pursuant thereto or hereto or in connection therewith or herewith shall have
been false or misleading in any material respect when made; or
(3) default in the performance, or breach, of any covenant or
warranty of the Company in Article Eight of this Supplemental Indenture,
which, in the case of the Company's failure to deliver shares of Common Stock
upon conversion of any Note as and when required by Section 8.03(d) shall
mean a failure to deliver such shares within seven days after a Conversion
Date, or default in the performance, or breach, of any covenant or warranty
of the Company or the Conversion Agent contained in the Conversion Agent
Agreement; or
(4) default in the performance, or breach, of any covenant or
warranty of the Company in Section 901, 902, 1003 or 1005 of the Original
Indenture or Section 3.01, Article Five, or Section 6.01 of the Supplemental
Indenture, and the continuance of such default or breach for a period of ten
days after there has been given, by telephone line facsimile transmission or
registered or certified mail, to the Company by the Trustee or to the Company
and the Trustee by the Holders of at least 25% in principal amount of the
Outstanding Securities of this series a written notice specifying such
default or breach and requiring it to be remedied and stating that such
notice is a "Notice of Default" hereunder; or
(5) default in the performance, or breach, of any covenant or
warranty of the Company in the Original Indenture or this Supplemental
Indenture (other than a covenant or warranty a default in the performance or
breach of which is elsewhere in this Section specifically dealt with or which
has expressly been included in the Original Indenture solely for the benefit
of a series of Securities other than the Notes), and continuance of such
default or breach for a period of 30 days after there has been given, by
registered or certified mail, to the Company by the Trustee or to the Company
and the Trustee by the Holders of at least 25% in principal amount of the
Outstanding Securities of this series a written notice specifying such
default or breach and requiring it to be remedied and stating that such
notice is a "Notice of Default" hereunder; or
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(6) any court of competent jurisdiction shall enter one or more
final judgments against the Company or any Subsidiary or any of their
respective properties or other assets in an aggregate amount in excess of
$1,000,000, which is not vacated, bonded, stayed, discharged, satisfied or
waived for a period of thirty consecutive days; or
(7) any Indebtedness of the Company or any Subsidiary which has an
outstanding principal amount in excess of $1,500,000 in the aggregate shall,
in accordance with its terms, be declared to be due and payable, or be
required to be prepaid or redeemed, other than by a regularly scheduled or
required payment, prior to the stated maturity thereof; or
(8) the Common Stock shall cease to be listed on any of Nasdaq,
the NYSE or the AMEX; or
(9) any Event of Default specified in Section 501(2), 501(5) or
501(6) of the Original Indenture.
The Events of Default provided in Sections 501(1) and 501(4) of the Original
Indenture shall be superseded with respect to the Notes by the Events of
Default provided in Sections 4.01(1), 4.01(4) and 4.01(5) of this
Supplemental Indenture with regard to any events which occur on or prior to
February 1, 2000. "Event of Default," whenever used in the Original
Indenture or this Supplemental Indenture with respect to the Notes for any
occurrence after February 1, 2000 shall mean the Events of Default specified
in Section 501(1), 501(2), 501(5), and 501(6) of the Original Indenture.
SECTION 4.02. AMOUNTS PAYABLE. In addition to any amount which
may become due and payable with respect to the Notes upon declaration that
the principal amount of the Notes shall be due and payable as provided in
Section 502 of the Original Indenture, in the case of any Event of Default
which occurs on or prior to February 1, 2000, there shall also be due and
payable to the Holder of each Note as and when such principal amount is due
and payable an amount equal to the product obtained by multiplying (1) the
outstanding principal amount of such Note TIMES (2) the Acceleration Premium.
ARTICLE FIVE
COVENANTS
SECTION 5.01. TRANSACTIONS WITH AFFILIATES. On or prior to
February 1, 2000, the Company will not, and will not permit any Subsidiary
to, directly or indirectly, pay any funds to or for the account of, make any
investment (whether by acquisition of stock or Indebtedness, by loan,
advance, transfer of property, guarantee or other agreement to pay, purchase
or service, directly or indirectly, any Indebtedness, or otherwise) in,
lease, sell, transfer or otherwise dispose of any assets, tangible or
intangible, to, or participate in, or effect any transaction in connection
with any joint enterprise or other joint arrangement with, any Affiliate of
the Company (other than a wholly owned Subsidiary), except on terms to the
Company or such Subsidiary no less favorable than terms that could be
obtained by the Company or such Subsidiary from a Person that is not an
Affiliate of the Company, as determined in good faith by the Board of
Directors of the Company.
23.
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SECTION 5.02. RESERVED AND AUTHORIZED SHARES. The Company
covenants that, during the period the conversion rights are exercisable, the
Company will reserve from its authorized and unissued Common Stock 3,854,763
shares (such amount to be subject to equitable adjustment from time to time
as provided in Section 9.15(b) of this Supplemental Indenture). The Company
shall, from time to time, authorize and reserve additional shares of Common
Stock to be issuable pursuant to the terms of the Notes as shall be necessary
to ensure that an adequate number of shares of Common Stock are at all times
authorized and reserved for issuance upon full conversion of the Notes in
accordance with the terms hereof and thereof.
SECTION 5.03. TENDER OFFERS. The Company will not itself, and
will not permit any Subsidiary on or prior to February 1, 2000 to (1) make
any Tender Offer for outstanding shares of Common Stock unless the Company
contemporaneously therewith makes an offer or (2) enter into an agreement
regarding a Tender Offer for outstanding shares of Common Stock by any Person
other than the Company or any Subsidiary unless such Person agrees with the
Company to make an offer, in either such case, to the Holders of the Notes to
purchase the same percentage of the outstanding principal amount of the Notes
held by each Holder of the Notes as the percentage of outstanding shares of
Common Stock offered to be purchased in such Tender Offer, at a price equal
to the product obtained by multiplying (x) the number of shares of Common
Stock which would, but for the purchase of such Notes pursuant to such Tender
Offer, be issuable on conversion in accordance with Article Eight of this
Supplemental Indenture of the portion (which may be all) of such Notes to be
purchased pursuant to such Tender Offer and any accrued and unpaid interest
thereon and any accrued and unpaid Default Interest if a Conversion Notice
were given by such Holder on the date of purchase of Common Stock pursuant to
such Tender Offer (determined without regard to any limitation on beneficial
ownership contained in Section 8.01 of this Supplemental Indenture and
without regard to whether such Notes are, by their terms, convertible at such
time) TIMES (y) the highest price per share of Common Stock paid or payable
pursuant to such Tender Offer.
SECTION 5.04. LIMITATION ON INDEBTEDNESS. At any time on or prior
to February 1, 1999, the Company shall not itself, and shall not permit any
Subsidiary to, create, assume, incur or in any manner become liable in
respect of, including, without limitation, by reason of any business
combination transaction (all of which are referred to herein as "incurring"),
any Indebtedness unless (i) such Indebtedness is Permitted Indebtedness and
(2) immediately after incurring such Indebtedness no Event of Default or
Repurchase Event shall be continuing.
SECTION 5.05. CERTAIN PAYMENTS. Any amount due to any Holder
shall be made by wire transfer of immediately available funds to such account
in the United States of America as shall have been designated by such Holder
for such purpose at least five Business Days prior to the date such amount is
paid by the Company. If any Holder shall not have so designated such an
account, any payment due to such Holder shall be paid to such Holder by check
payable to the order of such Holder, which shall be mailed to such Holder at
such Holder's address as it appears on the Security Register for the Notes.
SECTION 5.06. LIMITATION ON CERTAIN REPURCHASES. The Company
shall not, and shall not permit any Subsidiary to, repurchase or otherwise
re-acquire any Notes (other than pursuant to Section 6.01, 6.05 or 6.07 or
Article Seven) or offer any consideration for any amendment or waiver of the
terms of the Notes or the Indenture unless such repurchase or other re-
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acquisition is pursuant to a cash offer on the same terms to all Holders or
such consideration is offered to all Holders.
ARTICLE SIX
REDEMPTION
SECTION 6.01. LIMITATION ON SHARES ISSUABLE ON CONVERSION;
MANDATORY REDEMPTION. (a) Notwithstanding any other provision in the
Original Indenture, this Supplemental Indenture or the Notes, if,
notwithstanding the determination by Nasdaq that the Notes and the shares of
Common Stock are not subject to Rule 4460(i) of the Nasdaq, it is determined
by the Nasdaq after the issuance of the Notes that Rule 4460(i) is applicable
thereto, then, unless Stockholder Approval shall have been obtained from the
stockholders of the Company or waived by the Nasdaq (or such other stock
exchange on which the Common Stock is listed), the Company shall not be
required to issue upon conversion of any Note an aggregate number of shares
of Common Stock in excess of the portion of the Maximum Share Amount
allocated to such Note less the number of shares of Common Stock issued
pursuant to Section 3.02 from time to time in payment of interest on such
Note or any Predecessor Security of such Note. The Company shall maintain
records which show the number of shares of Common Stock issued by the Company
upon conversion from time to time of the Notes and issued by the Company
pursuant to Section 3.02 in payment of interest on each Note, which records
shall be controlling in the absence of manifest error. Upon original
issuance of each Note, the Company shall place a notation thereon of the
portion (expressed in shares of Common Stock) of the Maximum Share Amount
allocated to such Note, which shall be determined based on the ratio of the
original principal amount of such Note to the total authorized principal
amount of the Notes. Upon surrender of a Note for transfer or
re-registration thereof (or, at the option of the Holder of such Note, for
conversion pursuant to Article Eight of this Supplemental Indenture of less
than all of such Note), the Company shall make a notation on the new Note
issued upon such transfer or re-registration or evidencing such unconverted
portion of such Note, as the case may be, as to the remaining number of
shares of Common Stock from the Maximum Share Amount remaining available for
conversion of the Note evidenced by such new certificate (including, without
limitation, by taking into account the number of shares of Common Stock
issued by the Company pursuant to Section 3.02 in payment of interest on such
Note and not previously reflected on such Note, as shown on the records
maintained by the Company). If a Note is surrendered for split-up into two
or more Notes representing an aggregate principal amount equal to the
principal amount of such Note at the time so surrendered (as reduced by any
contemporaneous conversion of such Note), each Note issued on such split-up
shall bear a notation of the portion of the Maximum Share Amount allocated
thereto determined by pro rata allocation from among the remaining portion of
the Maximum Share Amount allocated to such Note at the time so surrendered.
If any Note is converted in full, repurchased or redeemed, all of the portion
of the Maximum Share Amount allocated to such Note which remains unissued
after such conversion, repurchase or redemption shall be re-allocated to the
Notes outstanding at the close of business on the date of such conversion,
repurchase or redemption of the Note so converted, repurchased or redeemed
pro rata based on the principal amounts outstanding at the close of business
on such date.
(b) (1) If on or prior to February 1, 2000 an Inconvertibility
Day occurs and by reason thereof the Company may be required to redeem any
Notes pursuant hereto, then the Company shall promptly, but in no event later
than three Business Days after each such occurrence,
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give an Inconvertibility Notice to each Holder of Notes (by telephone line
facsimile transmission at such number as such Holder has specified in writing
to the Company for such purposes or, if such Holder shall not have specified
any such number, by overnight courier at such Holder's address as the same
appears on the Security Register for the Notes) and to the Trustee and such
Holder may at any time after such occurrence give an Inconvertibility Notice
to the Company and to the Trustee. If the Company shall have given or been
required to give any Inconvertibility Notice, or if a Holder of Notes shall
have given any Inconvertibility Notice, with respect to such occurrence, then
within the applicable Redemption Election Period the Holder or Holders of
Notes who have been given or who have given such Notice shall have the right
by a Redemption Election given to the Company on or before February 1, 2000
(which may be contained in the Inconvertibility Notice given by such Holder)
to direct the Company to redeem the portion of each such Note (which, if
applicable, shall be all of each such Note) as shall not, on the Business Day
prior to the applicable Share Limitation Redemption Date, be convertible into
shares of Common Stock by reason of an Inconvertibility Day on the applicable
Share Limitation Redemption Date, at a price equal to the Share Limitation
Redemption Price; PROVIDED, HOWEVER, that if at the time any Holder
Redemption Election is given (x) no Event of Default shall have occurred and
be continuing and no Repurchase Event shall have occurred with respect to
which any Holder shall have the right to require repurchase of any Note
pursuant to Article Seven of this Supplemental Indenture or with respect to
which any Holder shall have exercised such right and the Company shall not
have paid the Repurchase Price, (y) the Company is in compliance in all
material respects with its obligations to the Holders (including, without
limitation, its obligations under the Note Purchase Agreements, the Original
Indenture, this Supplemental Indenture, the Conversion Agent Agreement and
the Notes), and (z) the Company (i) has and maintains Net Cash and Cash
Equivalent Balances at least equal to two and one-half times the Company's
Quarterly Cash Requirements or (ii) the Company deposits with the Trustee
from time to time, for the pro rata benefit of the Holders of Notes which
have Inconvertible Portions, cash in an amount which is at all times at least
equal to 250% of the aggregate Inconvertible Portion of all outstanding
Notes, then the Company shall not be required to redeem any Inconvertible
Portion of any Note for a period of up to 60 days after such Holder
Redemption Election is given in order that the Company may seek the
Stockholder Approval. If the Company determines to suspend its obligation to
redeem the Inconvertible Portion of Notes in accordance with the proviso to
the immediately preceding sentence, the Company shall so notify the Holders
and the Trustee and shall promptly prepare proxy materials for, and call and
hold, a meeting of stockholders to seek the Stockholder Approval. If (x)
such meeting is not held within such 60-day period or (y) a vote shall be
taken at such meeting and the Stockholder Approval shall not have been
obtained, then in either such case upon such occurrence the Company shall
thereafter once again be required to redeem Notes in accordance with this
Section 6.01. If the Company determines to suspend its obligation to redeem
the Inconvertible Portion of Notes in accordance herewith, then thereafter
the Company shall not be entitled to exercise its right to do so on any other
occasion.
(2) An Inconvertibility Notice or a Redemption Election given by a
Holder of Notes shall be deemed for all purposes to be in proper form unless
the Company notifies such Holder in writing within three Business Days after
such Inconvertibility Notice or Redemption Election has been given (which
notice shall specify all defects in such Inconvertibility Notice or
Redemption Election), and any Inconvertibility Notice or Redemption Election
containing any such defect shall nonetheless be effective on the date given
if such Holder promptly undertakes to correct all such defects. Whether or
not a Holder of Notes has given any such undertaking, no such claim of error
shall limit or delay performance of the Company's obligation to redeem the
full amount of the Inconvertible Portion of a Note as to which a Redemption
Election has been given and which is
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not in dispute.
(c) Notwithstanding the giving of any Inconvertibility Notice by
the Company to a Holder of Notes or the giving or the absence of any
Inconvertibility Notice or Redemption Election by any Holder of Notes or any
redemption of an Inconvertible Portion of any Notes pursuant to Section
6.01(b) of this Supplemental Indenture, thereafter the provisions of Section
6.01(b) of this Supplemental Indenture shall continue to be applicable to any
such inconvertibility which occurs on or prior to February 1, 2000, unless,
prior to a particular Inconvertibility Day, the Stockholder Approval shall
have been obtained or waived by the Nasdaq (or such other stock exchange on
which the Common Stock is listed).
(d) On each Share Limitation Redemption Date, the Company shall
make payment in immediately available funds of the applicable Share
Limitation Redemption Price to or upon the order of a Holder entitled thereto
as specified by such Holder in writing to the Company at least one Business
Day prior to such Share Limitation Redemption Date. If the Company is
required to redeem any Inconvertible Portion of a Note pursuant to this
Section 6.01, the Company shall make payment to the Holder of such Note of an
amount equal to the Share Limitation Redemption Price. Upon redemption of
less than all of a Note, promptly, but in no event later than three Business
Days after surrender of such Note to the Company, the Company shall issue a
replacement Note of like tenor having a principal amount equal to the
principal amount of such Note remaining after such redemption.
(e) If the Company shall have failed to pay in full the Share
Limitation Redemption Price for any portion (which, if applicable, may be
all) of any Inconvertible Portion of a Note when the same is due and payable
to the Holder of such Note by reason of an Inconvertibility Day which occurs
on or prior to February 1, 2000 and the Stockholder Approval shall not have
been obtained, without in any way relieving the Company of its obligation to
pay such amount in accordance with Sections 6.01(b) and 6.01(d), upon the
written request of the Majority Holders, the Company shall use its best
efforts to obtain a waiver from Nasdaq (or such other stock exchange on which
the Common Stock is listed) of the requirement for Stockholder Approval for
issuance of all shares of Common Stock issuable upon conversion of the Notes.
If such a waiver, in form reasonably satisfactory to the Majority Holders,
is not obtained within 15 days after the Company's receipt of such request
from the Majority Holders, the Company promptly shall call a special meeting
of its stockholders, to be held not later than 60 days after the expiration
of the foregoing 15-day period, to seek the Stockholder Approval for issuance
of all shares of Common Stock issuable upon conversion of the Notes in
accordance with Section 8.01 of this Supplemental Indenture.
SECTION 6.02. FORM OF COMPANY INCONVERTIBILITY NOTICE.
COMPANY INCONVERTIBILITY NOTICE
4% SENIOR SUBORDINATED CONVERTIBLE NOTE DUE 2005
TO:________________________________
(Name of Holder)
(1) Pursuant to the terms of the 4% Senior Subordinated
Convertible Note due 2005 (the "Note"), Cygnus, Inc., a Delaware corporation
(the "Company"), hereby notifies the
27.
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above-named Holder that on _____________ (fill in date) an Inconvertibility
Day occurred and on such date $_______ (fill in amount) of principal of the
Note and the related interest, if any, became inconvertible by reason of the
occurrence of such Inconvertibility Day.
(2) The Inconvertibility Day referred to in this Notice relates to
(check (a) or (b)):
1 (a) The Maximum Share Amount as described in clause (x) of the
definition of Inconvertibility Day
2 (b) A lack of sufficient reserved shares of Common Stock as described
in clause (y) of the definition of Inconvertibility Day.
(3) Capitalized terms used herein and not otherwise defined herein
have the respective meanings provided in the Note, the Supplemental Indenture
and the Original Indenture.
Date _______________ CYGNUS, INC.
By _________________________________
cc: State Street Bank and Trust Company of California, N.A.,
as Trustee
725 South Figueroa Street, Suite 3100
Los Angeles, CA 90017
Attention: Mr. Scott Emmons
SECTION 6.03. FORM OF HOLDER INCONVERTIBILITY NOTICE.
HOLDER INCONVERTIBILITY NOTICE
4% SENIOR SUBORDINATED CONVERTIBLE NOTE DUE 2005
TO: CYGNUS, INC.
(1) Pursuant to the terms of the 4% Senior Subordinated
Convertible Note due 2005 (the "Note"), the undersigned (the "Holder"),
hereby notifies Cygnus, Inc., a Delaware corporation (the "Company"), that on
________________ (fill in date) an Inconvertibility Day occurred and on such
date $___________ (fill in amount) of principal of the Note and the related
interest, if any, became inconvertible by reason of the occurrence of such
Inconvertibility Day.
(2) The Inconvertibility Day referred to in this Notice relates to
(check (a) or (b)):
3 (a) The Maximum Share Amount as described in clause (x) of the
definition of
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Inconvertibility Day.
4 (b) A lack of sufficient reserved shares of Common Stock as described
in clause (y) of the definition of Inconvertibility Day.
(3) If the following date and amounts are completed in this
Notice, the Holder hereby directs the Company to redeem the principal amount
set forth below (and the related interest) in accordance with Section 6.01 of
the Supplemental Indenture:
(a) Principal amount of Note to be redeemed: $______________ (fill
in)
(b) On _______________ (fill in Share Limitation Redemption Date),
the Company shall pay the Holder the Share Limitation Redemption Price of
the portion (which, if applicable, may be all) of the Note to be redeemed
of $______________ . The Share Limitation Redemption Price is equal to
the sum of (1) the product obtained by multiplying (A) $____________
(fill in amount to be redeemed) of principal TIMES (B) 110% PLUS
(2) $_________________ of accrued and unpaid interest on such principal
amount to such Redemption Date PLUS (3) $_______________ of accrued and
unpaid Default Interest (if any) to such Share Limitation Redemption Date.
(4) Capitalized terms used herein and not otherwise defined herein
have the respective meanings provided in the Note, the Original Indenture and
the Supplemental Indenture.
Date______________ NAME OF HOLDER:
_______________________________________
By_____________________________________
Title:
cc: State Street Bank and Trust Company of California, N.A.,
as Trustee
725 South Figueroa Street, Suite 3100
Los Angeles, CA 90017
Attention: Mr. Scott Emmons
SECTION 6.04. FORM OF REDEMPTION ELECTION.
HOLDER REDEMPTION ELECTION
4% SENIOR SUBORDINATED CONVERTIBLE NOTE DUE 2005
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TO: CYGNUS, INC.
(1) Pursuant to the terms of the 4% Senior Subordinated
Convertible Note due 2005 (the "Note"), the undersigned (the "Holder") hereby
notifies CYGNUS, Inc., a Delaware corporation (the "Company"), that the
Holder is exercising its right to require the Company to redeem a portion
(which, if applicable, may be all) of the Note as set forth below in
accordance with Section 6.01 of the Supplemental Indenture. On
__________________ (fill in Share Limitation Redemption Date), the Company
shall pay the Holder the Share Limitation Redemption Price of
$_______________. The Share Limitation Redemption Price is equal to the sum
of (1) the product obtained by multiplying (A) $_______________________ (fill
in amount to be redeemed) of principal TIMES (B) 110% PLUS (2)
$_______________ of accrued and unpaid interest on such principal amount to
such Share Limitation Redemption Date PLUS (3) $_______________ of accrued
and unpaid Default Interest (if any) to such Share Limitation Redemption Date.
(2) Capitalized terms used herein and not otherwise defined herein
have the respective meanings provided in the Note, the Original Indenture and
the Supplemental Indenture.
Date:____________________NAME OF HOLDER:
__________________________________
By________________________________
cc: State Street Bank and Trust Company of California, N.A.,
as Trustee
725 South Figueroa Street, Suite 3100
Los Angeles, CA 90017
Attention: Mr. Scott Emmons
SECTION 6.05. REDEMPTION BASED ON TRADING ABOVE MAXIMUM CONVERSION
PRICE.
(a) At any time on or after February 1, 1999, so long as
(x) for a period of 20 consecutive Trading Days, the Market Price
of the Common Stock on each such Trading Day shall have been at least equal
to 150% of the Maximum Conversion Price in effect on such Trading Day; and
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(y) on the date the Redemption Notice is given as provided
herein, no Event of Default shall have occurred and be continuing, on the
Redemption Date no Inconvertibility Day shall have occurred since the date
the Redemption Notice was given and on the Redemption Date no Repurchase
Event shall have occurred with respect to which any Holder shall have the
right to require repurchase of any Note pursuant to Article Seven of this
Supplemental Indenture or with respect to which any Holder shall have
exercised such right and the Company shall not have paid the Repurchase
Price;
then the Company shall have the right on one occasion only, at its election,
to redeem all or any part of the Notes (other than the Inconvertible Portion
of Notes as to which a Holder Redemption Election has been given and which
are thereby required to be redeemed pursuant to Section 6.01 and other than
Notes or the portion thereof as to which a Holder Notice has been given in
accordance with Article Seven of this Supplemental Indenture) pursuant to
this Section 6.05 at the Redemption Price. In order to exercise its right of
redemption under this Section 6.05, the Company shall, not later than ten
Trading Days after the last Trading Day in the 20-day period giving rise to
the Company's right to redeem the Notes hereunder, give a Redemption Notice
to each Holder not less than 25 days or more than 35 days prior to the
Redemption Date. On the Redemption Date, the Company shall pay to or upon
the order of each Holder by wire transfer of immediately available funds to
such account within the United States of America as shall be specified for
such purpose by each Holder an amount equal to the Redemption Price of the
Notes to be redeemed from such Holder on the Redemption Date.
(b) Notwithstanding the giving of a Redemption Notice, each Holder
shall be entitled to convert in accordance with the terms of such Holder's
Notes all or any portion thereof by giving a Conversion Notice at any time
prior to (1) the Redemption Date or (2) if the Company fails to pay the
Redemption Price of such Notes on the applicable Redemption Date, the date on
which the Company pays the Redemption Price of such Notes.
SECTION 6.06. FORM OF REDEMPTION NOTICE
REDEMPTION NOTICE
4% SENIOR SUBORDINATED CONVERTIBLE NOTES DUE 2005
To:_______________________
(Name of Holder)
(1) Pursuant to the terms of the 4% Senior Subordinated
Convertible Note due 2005 (the "Note"), Cygnus, Inc., a Delaware corporation
(the "Company"), hereby notifies the above-named Holder that the Company is
exercising its right to redeem the Notes in accordance with Section 6.05 of
the Supplemental Indenture.
(2) The aggregate principal amount of Notes to be redeemed from
the Holder is $_____________.
(3) The Redemption Price of the Notes to be redeemed from the
Holder is $___________ (less the Redemption Price of any portion thereof
which is converted by the Holder
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prior to the Redemption Date).
(4) The Redemption Date is _______________.
Date:___________________ CYGNUS, INC.
By:_______________________________
Title:
cc: State Street Bank and Trust Company of California, N.A.,
as Trustee
725 South Figueroa Street, Suite 3100
Los Angeles, CA 90017
Attention: Mr. Scott Emmons
SECTION 6.07. REDEMPTION BASED ON MINIMUM CONVERSION PRICE.
(a) At any time on or after February 1, 1999 (as such date may be
extended pursuant to Section 8.04 of this Supplemental Indenture), if the
Conversion Price in effect on any date is less than $12.50 (subject to
adjustment as provided in Section 9.15(a) of this Supplemental Indenture),
then so long as:
(x) on the date the Minimum Conversion Price Redemption Notice is
given as provided herein and on the Minimum Conversion Price Redemption
Date, no Event of Default has occurred and is continuing and no Repurchase
Event shall have occurred with respect to which any Holder shall have the
right to require repurchase of any Note pursuant to Article Seven of this
Supplemental Indenture or with respect to which any Holder shall have
exercised such right and the Company shall not have paid the Repurchase
Price;
(y) on the Minimum Conversion Price Redemption Date, the Company
shall be in compliance in all material respects with its obligations to the
Holders (including, without limitation, its obligations under the Note
Purchase Agreements, the Original Indenture, this Supplemental Indenture,
the Conversion Agent Agreement and the Notes); and
(z) on the date the Company gives a Minimum Conversion Price
Redemption Notice, the Company has cash resources available for payment of
the Minimum Conversion Price Redemption Price of all Notes to be redeemed;
the Company shall have the right to redeem at any time all, or from time to
time any part, of the Notes (other than the Inconvertible Portion of Notes as
to which a Holder Redemption Election has been given which are required to be
redeemed pursuant to Section 6.01 and other than Notes or the portion thereof
as to which a Holder Notice has been given in accordance with Article Seven
of this Supplemental Indenture) pursuant to this Section 6.07 at the Minimum
Conversion Price Redemption Price. In order to exercise its right of
redemption under this Section 6.07, the
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Company shall, within five Trading Days after the date on which the
Conversion Price entitled the Company to exercise redemption rights under
this Section 6.07, give a Minimum Conversion Price Redemption Notice. On the
Minimum Conversion Price Redemption Date, the Company shall pay, to or upon
the order of each Holder, by wire transfer of immediately available funds to
such account within the United States of America as shall be specified for
such purpose by such Holder, an amount equal to the Minimum Conversion Price
Redemption Price of the Notes held by such Holder on the Minimum Conversion
Price Redemption Date.
(b) Notwithstanding the giving of a Minimum Conversion Price
Redemption Notice, each Holder shall be entitled to convert in accordance
with the terms of such Holder's Notes all or any portion thereof not in
excess of the Redemption-Free Conversion Amount thereof by giving a
Conversion Notice at any time prior to (1) the close of business on the
Trading Day prior to the Minimum Conversion Price Redemption Date or (2) if
the Company fails to pay the Minimum Conversion Price Redemption Price on the
Minimum Conversion Price Redemption Date, the date on which the Company pays
the Minimum Conversion Price Redemption Price.
(c) If at any time the Company shall have become entitled to
exercise its right to redeem the Notes pursuant to this Section 6.07 and the
Company shall not exercise such right in accordance herewith, then thereafter
the Company shall not be entitled to exercise its right to redeem the Notes
pursuant to this Section 6.07 unless the requirements of Section 6.07(a)
shall be satisfied on a date which is more than 90 days after the date the
Company became so entitled to exercise its right to redeem the Notes pursuant
to this Section 6.07.
SECTION 6.08. FORM OF MINIMUM CONVERSION PRICE REDEMPTION NOTICE.
MINIMUM CONVERSION PRICE REDEMPTION NOTICE
4% SENIOR SUBORDINATED CONVERTIBLE NOTES DUE 2005
To:_______________________
(Name of Holder)
(1) Pursuant to the terms of the 4% Senior Subordinated
Convertible Note due 2005 (the "Note"), Cygnus, Inc., a Delaware corporation
(the "Company"), hereby notifies the above-named Holder that the Company is
exercising its right to redeem the Notes in accordance with Section 6.07 of
the Supplemental Indenture.
(2) The aggregate principal amount of Notes to be redeemed from
the Holder is $_____________.
(3) The Minimum Conversion Price Redemption Price of the Notes to
be redeemed from the Holder is $___________ (less the Minimum Conversion
Price Redemption Price of any portion thereof which is converted by the
Holder prior to the Minimum Conversion Price Redemption Date).
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(4) The Minimum Conversion Price Redemption Date is
_______________.
Date: CYGNUS, INC.
By: ________________________________
Title:
cc: State Street Bank and Trust Company of California, N.A.,
as Trustee
725 South Figueroa Street, Suite 3100
Los Angeles, CA 90017
Attention: Mr. Scott Emmons
SECTION 6.09. OTHER REDEMPTION OR PREPAYMENT; ABSENCE OF SINKING
FUND. Except as expressly provided in this Article Six, the Notes shall not
be subject to redemption or repayment at the option of the Company prior to
February 1, 2000. The Notes shall not be entitled to the benefit of any
sinking fund for retirement of the Notes. At any time on or after February
1, 2000, the Company shall have the right to redeem the Notes in whole at any
time, or in part from time to time, on three Business Days' notice to the
Holders, at a redemption price equal to the outstanding principal amount of
the Notes being redeemed plus accrued interest to the redemption date.
SECTION 6.10. ORIGINAL INDENTURE. The provisions of this
Supplemental Indenture regarding redemption of Notes shall supersede the
provisions of Sections 1101, 1102 and 1104 of the Original Indenture.
ARTICLE SEVEN
REPURCHASE UPON A REPURCHASE EVENT
SECTION 7.01. REPURCHASE RIGHT. If on or prior to February 1,
2000 there shall occur a Repurchase Event, then each Holder of Notes shall
have the right, at such Holder's option, to require the Company to repurchase
all of such Holder's Notes, or any portion hereof (in a minimum principal
amount of $100,000 or integral multiples thereof (or such lesser remaining
principal amount of such Note)), on the repurchase date that is five Business
Days after the date of the Holder Notice delivered with respect to such
Repurchase Event. Each Holder of Notes shall have the right to require the
Company to repurchase such Holder's Notes if a Repurchase Event occurs at any
time while any portion of the principal amount of such Notes is outstanding
and prior to February 1, 2000 at a price equal to the Repurchase Price.
SECTION 7.02. NOTICES; METHOD OF EXERCISING REPURCHASE RIGHTS,
ETC. (a) On or before the fifth Business Day after the occurrence of a
Repurchase Event in respect of which any Holder is entitled to repurchase
rights hereunder, the Company shall give to each Holder of Notes a Company
Notice of the occurrence of the Repurchase Event and of the repurchase right
set forth
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herein arising as a result thereof. Such Company Notice shall set forth:
(i) the date by which the repurchase right must be exercised, and
(ii) a description of the procedure (set forth below) which the Holder
must follow to exercise such Holder's repurchase rights.
No failure of the Company to give a Company Notice or defect therein shall
limit the right of any Holder of Notes to exercise their repurchase rights or
affect the validity of the proceedings for the repurchase of any Note or
portion thereof.
(b) To exercise the repurchase right, a Holder of Notes shall
deliver to the Company on or before the thirtieth day after the Company
Notice (or if no such Company Notice has been given, within forty days after
such Holder first learns of the Repurchase Event) (i) a Holder Notice setting
forth the name of the Holder and the principal amount of such Holder's Notes
to be repurchased, and (ii) such Holder's Note, duly endorsed for transfer to
the Company of the portion of the principal amount thereof to be repurchased.
A Holder Notice may be revoked by the Holder who gave such Holder Notice at
any time prior to the time the Company pays the applicable Repurchase Price
to such Holder.
SECTION 7.03. OTHER. (a) If the Company fails to pay the
applicable Repurchase Price to a Holder of Notes entitled thereto on the
applicable repurchase date for any Note (or portion hereof) as to which the
repurchase right has been properly exercised pursuant to this Article Seven,
then the Repurchase Price for the portion (which, if applicable, may be all)
of this Note which is required to have been so repurchased shall bear
interest to the extent not prohibited by applicable law from the applicable
repurchase date until paid in full at the Default Rate.
(b) If a portion of any Note is to be repurchased, upon surrender
of such Note to the Company in accordance with the terms of this Article
Seven, the Company shall execute and deliver to the Holder of such Note
without service charge, a new Note or Notes, containing identical terms and
conditions, in such denomination or denominations as requested by such Holder
in aggregate principal amount equal to, and in exchange for, the
unrepurchased portion of the principal amount of the Note or Notes so
surrendered.
(c) The Company shall notify a Holder of Notes of any claim by the
Company of manifest error in a Holder Notice given by such Holder within five
Business Days after such Holder gives such notice and no such claim of error
shall limit or delay performance of the Company's obligation to repurchase
such portion of such Holder's Notes which is not in dispute and (ii) such
notice shall be deemed for all purposes to be in proper form unless the
Company notifies such Holder within five Business Days after such notice has
been given (which notice from the Company shall specify all defects in such
notice) and any Holder Notice containing any such defect shall nonetheless be
effective on the date given if the Holder promptly undertakes to correct all
such defects.
SECTION 7.04. FORM OF COMPANY NOTICE.
COMPANY NOTICE
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4% SENIOR SUBORDINATED CONVERTIBLE NOTE DUE 2005
TO:_____________________
(Name of Holder)
(1) A Repurchase Event described in clause
_________________________ of the definition of such term for purposes of the
4% Senior Subordinated Convertible Note due 2005 (the "Note") of Cygnus,
Inc., a Delaware corporation (the "Company"), occurred on ________________ ,
_____. As a result of such Repurchase Event, the above-named Holder (the
"Holder") is entitled to exercise its repurchase rights pursuant to Article
Seven of the Supplemental Indenture.
(2) The Holder's repurchase right must be exercised on or before
______________, ____.
(3) On or before the date set forth in the preceding paragraph
(2), the Holder must:
(a) deliver to the Company a Holder Notice, in the form set
forth in Section 7.05 of the Supplemental Indenture; and
(b) the Note, duly endorsed for transfer to the Company of the
portion of the principal amount to be repurchased.
(4) Capitalized terms used herein and not otherwise defined herein
have the respective meanings provided in the Note, the Original Indenture and
the Supplemental Indenture.
Date _________________________ CYGNUS, INC.
By________________________________
Title:
cc: State Street Bank and Trust Company of California, N.A.,
as Trustee
725 South Figueroa Street, Suite 3100
Los Angeles, CA 90017
Attention: Mr. Scott Emmons
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<PAGE>
SECTION 7.05. FORM OF HOLDER NOTICE.
HOLDER NOTICE
4% SENIOR SUBORDINATED CONVERTIBLE NOTE DUE 2005
TO: CYGNUS, INC.
(1) Pursuant to the terms of the 4% Senior Subordinated
Convertible Note due 2005 (the "Note"), the undersigned Holder hereby elects
to exercise its right to require repurchase by the Company pursuant to
Article Seven of the Supplemental Indenture of $_______________ of the Note,
equal to the sum of $______________ principal amount of the Note,
$________________ of accrued and unpaid interest on such principal amount and
$__________________ of Default Interest on such interest at the Repurchase
Price provided in the Supplemental Indenture.
(2) This Notice is being given in respect of a Repurchase Event
described in clause ________ of the definition of such term.
(3) Capitalized terms used herein and not otherwise defined herein
have the respective meanings provided in the Note, the Original Indenture and
the Supplemental Indenture.
Date:_____________________________ NAME OF HOLDER:
___________________________________
By________________________________
Signature of Registered Holder
(Must be signed exactly as name
appears in the Note.)
cc: State Street Bank and Trust Company of California, N.A.,
as Trustee
725 South Figueroa Street, Suite 3100
Los Angeles, CA 90017
Attention: Mr. Scott Emmons
37.
<PAGE>
ARTICLE EIGHT
CONVERSION
SECTION 8.01. CONVERSION RIGHT. Each Holder of Notes shall have
the right (x) in the case of any Tranche 1 Note, from and after the Issuance
Date and then at any time on or prior to the date such Note is paid in full,
and (y) in the case of any Tranche 2 Note, from and after the date which is
121 days after the Issuance Date and then at any date on or prior to the date
such Note is paid in full, in each such case to convert at any time all or
from time to time any part of the outstanding and unpaid principal amount of
such Note, at least equal to $25,000 or such lesser amount as shall remain
unpaid at the time of the conversion or may be permitted from time to time by
the Company in its discretion, and accrued and unpaid interest on the
principal amount to be converted and on any such interest, into fully paid
and nonassessable shares of Common Stock at the Conversion Price in effect on
the date the applicable Conversion Notice is given in accordance with this
Supplemental Indenture and such Note. Notwithstanding any other provision of
the Original Indenture, this Supplemental Indenture or the Notes, in no event
shall a Holder of Notes be entitled at any time to convert any portion of the
principal amount of such Holder's Notes (and accrued and unpaid interest
thereon and Default Interest on any such interest) in excess of that portion
of the principal amount of such Holder's Notes (and accrued and unpaid
interest thereon and Default Interest, on any such interest, if any) upon
conversion of which the sum of (1) the number of shares of Common Stock
beneficially owned by such Holder (including shares of Common Stock
beneficially owned by all Aggregated Persons of such Holder) (other than
shares of Common Stock deemed beneficially owned by such Holder or any
Aggregated Person of such Holder through the ownership of (x) the unconverted
portion of the principal amount of any Notes and accrued and unpaid interest
thereon and Default Interest on any such interest and (y) the unconverted or
unexercised portion of any instrument which contains limitations similar to
those set forth in this sentence) and (2) the number of shares of Common
Stock issuable upon conversion of the portion of the principal amount of such
Notes and accrued and unpaid interest thereon and Default Interest on any
such interest with respect to which the determination in this sentence is
being made, would result in beneficial ownership by such Holder and all
Aggregated Persons of such Holder of more than 4.9% of the outstanding shares
of Common Stock. For purposes of the immediately preceding sentence,
beneficial ownership shall be determined in accordance with Section 13(d) of
the 1934 Act, and Regulation 13D-G thereunder, except as otherwise provided
in clause (1) of the immediately preceding sentence. For purposes of the
second preceding sentence, the Company and the Trustee shall be entitled to
rely, and shall be fully protected in relying, on any statement or
representation made by a Holder of Notes to the Company in connection with a
particular conversion, without any obligation on the part of the Company or
the Trustee to make any inquiry or investigation or to examine its records or
the records of any transfer agent for the Common Stock and without any
liability of the Company or the Trustee with respect thereto. The number of
shares of Common Stock to be issued upon each conversion of a Note shall be
determined by dividing the sum of (1) that portion of the principal amount of
such Note to be converted PLUS (2) accrued and unpaid interest on such
principal amount to the date the Conversion Notice for such conversion is
given PLUS (3) Default Interest, if any, on the amount referred to in the
immediately preceding clause (2) to the date such Conversion Notice is given,
by the Conversion Price in effect on the date the Conversion Notice for such
conversion is given.
SECTION 8.02. AUTHORIZATION OF SHARES. The Company represents and
warrants that upon issuance of shares of Common Stock on conversion of the
Notes, such shares of Common
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Stock will be duly and validly issued, fully paid and non-assessable. The
Company agrees that its issuance of the Notes shall constitute full authority
to its officers and agents who are charged with the duty of executing stock
certificates to execute or to cause to be executed and issue the necessary
certificates for shares of Common Stock upon the conversion of the Notes.
SECTION 8.03. METHOD OF CONVERSION. (a) The right of a Holder of
Notes to convert any Note shall be exercised by delivering (which may be made
by telephone line facsimile transmission) to the Conversion Agent at the
address or telephone line facsimile transmission number provided in or
pursuant to the Conversion Agent Agreement or set forth in the form of
Conversion Notice set forth in Section 2.04 of this Supplemental Indenture.
A Holder who has given a Conversion Notice by telephone line facsimile
transmission shall also send a copy of such Conversion Notice to the
Conversion Agent and the Trustee by overnight courier service as promptly as
possible after such Conversion Notice is given; PROVIDED, HOWEVER, that the
failure to so send copies of such Conversion Notice shall not affect the
validity or Conversion Date of such Conversion Notice. The number of shares
of Common Stock to be issued upon each conversion of a Note shall be the
number set forth in the applicable Conversion Notice, which number shall be
conclusive absent manifest error. The Company shall notify a Holder of Notes
of any claim by the Company of manifest error in a Conversion Notice within
three Trading Days after such Holder gives such Conversion Notice and no such
claim of error shall limit or delay performance of the Company's obligation
to issue upon such conversion the number of shares of Common Stock which are
not in dispute. A Conversion Notice shall be deemed for all purposes to be
in proper form unless the Company notifies the Holder who has given such
Conversion Notice by telephone line facsimile transmission within three
Trading Days after such Conversion Notice has been given (which notice from
the Company shall specify all defects in such Conversion Notice) and any
Conversion Notice containing any such defect shall nonetheless be effective
on the date given if the Holder promptly undertakes to correct all such
defects. The Company shall not be required to pay any tax which may be
payable in respect of any transfer involved in the issuance and delivery of
shares of Common Stock or other securities or property on conversion of any
Note in a name other than that of the Holder of such Note, and the Company
shall not be required to issue or deliver any such shares or other securities
or property unless and until the Person or Persons requesting the issuance
thereof shall have paid to the Company the amount of any such tax or shall
have established to the satisfaction of the Company that such tax has been
paid. The Holder of such Note shall be responsible for the amount of any
withholding tax payable in connection with any conversion.
(b) If a Holder elects to convert a Note in accordance with
Section 8.01 of this Supplemental Indenture, such Holder shall not be
required to physically surrender such Note unless the entire unpaid principal
amount of such Note is so converted. The Company shall maintain records
showing the principal amount so converted and the dates of such conversions
or shall use such other method, reasonably satisfactory to the Majority
Holders and the Company, so as not to require physical surrender of such
Notes upon each such conversion. In the event of any dispute or discrepancy,
such records of the Company shall be controlling and determinative in the
absence of manifest error. Notwithstanding the foregoing, if any portion of
a Note is converted as aforesaid, in addition to compliance with Section 9.12
of this Supplemental Indenture, the Holder of such Note may not transfer such
Note unless such Holder first physically surrenders such Note to the Company,
whereupon the Company will forthwith issue and deliver upon the order of such
Holder a new note of like tenor, registered as such Holder (upon payment by
such Holder of any applicable transfer taxes) may request, representing in
the aggregate the remaining unpaid principal amount of
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such Note. EACH HOLDER OF ANY NOTE AND ANY ASSIGNEE, BY ACCEPTANCE OF SUCH
NOTE, ACKNOWLEDGES AND AGREES THAT, BY REASON OF THE PROVISIONS OF THIS
PARAGRAPH, FOLLOWING CONVERSION OF A PORTION OF SUCH NOTE, THE UNPAID AND
UNCONVERTED PRINCIPAL AMOUNT OF SUCH NOTE REPRESENTED BY SUCH NOTE MAY BE
LESS THAN THE AMOUNT STATED ON THE FACE HEREOF. The Company may by notice to
any Holder from time to time require such Holder to surrender such Holder's
Note in exchange for the issuance by the Company of a new Note in a principal
amount equal to the outstanding principal amount of such Note and otherwise
having terms identical to such Note.
(c) In case of any consolidation or merger of the Company with any
other corporation (other than a wholly owned subsidiary of the Company) in
which the Company is not the surviving corporation, or in case of any sale or
transfer of all or substantially all of the assets of the Company, or in the
case of any share exchange pursuant to which all of the outstanding shares of
Common Stock are converted into other securities or property, in any such
case which occurs on or prior to February 1, 2000, the Company shall make
appropriate provision or cause appropriate provision to be made so that the
Holders of the Notes shall have the right thereafter to convert the Notes
into the kind of shares of stock and other securities and property receivable
upon such consolidation, merger, sale, transfer or share exchange by the
Persons who were holders of Common Stock immediately prior to the effective
date of such consolidation, merger, sale, transfer or share exchange and on a
basis which preserves the economic benefits of the conversion rights of the
Holders of the Notes on a basis as nearly as practical as such rights existed
prior to such consolidation, merger, sale, transfer or share exchange. If,
in connection with any such consolidation, merger, sale, transfer or share
exchange each holder of shares of Common Stock is entitled to elect to
receive either securities, cash or other assets upon completion of such
transaction, the Company shall provide or cause to be provided to the Holders
of the Notes the right to elect prior to completion of such transaction the
securities, cash or other assets into which such Holder's Notes shall be
convertible after completion of any such transaction on the same terms and
subject to the same conditions applicable to holders of the Common Stock
(including, without limitation, notice of the right to elect, limitations on
the period in which such election shall be made, and that the effect of
failing to exercise the election will be deemed to be an election of the same
alternative as that for holders of Common Stock who fail to make an
election). The Company shall not effect any such transaction unless the
provisions of this paragraph have been complied with. The above provisions
shall similarly apply to successive consolidations, mergers, sales, transfers
or share exchanges.
Whenever the Company shall propose to take any of the actions
specified in this Section 8.03(c), the Company shall cause a notice to be
mailed to the Holders at least 20 days prior to the date on which the books
of the Company will close or on which the securityholders entitled to
participate in such action is to be determined. Such notice shall specify
the action proposed to be taken by the Company and the date as of which
holders of record of the Common Stock shall participate in any such actions
or be entitled to exchange their Common Stock for securities or other
property, as the case may be.
So long as this Section 8.03 is applicable, (x) the provisions of
this Section 8.03(c) shall supersede and replace Section 801 of the Original
Indenture and (y) for the purposes of Section 802 of the Original Indenture
the reference therein to Section 801 of the Original Indenture shall be
deemed to be a reference to this Section 8.03(c).
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(d) (1) Upon receipt by the Conversion Agent from a Holder of a
Conversion Notice meeting the requirements for conversion as provided in
Section 8.01 and this Section 8.03, the Company shall issue and deliver or
cause to be issued and delivered to such Holder certificates for the Common
Stock issuable upon such conversion by the close of business on the third
Trading Day after the date of such receipt, and as of the close of business
on the date of receipt of such Conversion Notice such Holder shall be deemed
to be the holder of record of the Common Stock issuable upon such conversion,
the outstanding principal amount and the amount of accrued and unpaid
interest on such Note so converted shall be reduced to reflect such
conversion, and all rights with respect to the portion of such Note being so
converted shall forthwith terminate except the right to receive the Common
Stock or other securities, cash or other assets, as herein provided, on such
conversion. If a Holder shall have given a Conversion Notice in accordance
with the terms hereof, the Company's obligation to issue and deliver the
certificates for Common Stock upon such conversion shall be absolute and
unconditional, irrespective of any action or inaction by such Holder to
enforce the same, any waiver or consent with respect to any provision hereof
or thereof, the recovery of any judgment against any person or any action to
enforce the same, any failure or delay in the enforcement of any other
obligation of the Company to such Holder, or any setoff, counterclaim,
recoupment, limitation or termination, or any breach or alleged breach by
such Holder or any other person of any obligation to the Company or any
violation or alleged violation of law by such Holder or any other person, and
irrespective of any other circumstance which might otherwise limit such
obligation of the Company to such Holder in connection with such conversion;
PROVIDED, HOWEVER, that nothing herein shall limit or prejudice the right of
the Company to pursue any such claim in any other manner permitted by
applicable law. The occurrence of an event which requires an equitable
adjustment of the Trading Price as contemplated by the definition thereof
shall in no way restrict or delay the right of the Holders of Notes to
receive certificates for Common Stock upon conversion of Notes and the
Company shall use its best efforts to implement such adjustment on terms
reasonably acceptable to the Holders within two Trading Days after such
occurrence.
(2) Notwithstanding any other provision of the Original Indenture,
this Supplemental Indenture or the Conversion Agent Agreement, if an error in
a Conversion Notice or the number of shares of Common Stock issued in respect
thereof is discovered within ten Business Days after such Conversion Notice
is given, which error either (x) is so discovered by the Company and which
the Company, in the exercise of due care, had not discovered within three
Trading Days after such Conversion Notice was given, or (y) is discovered by
the Holder giving such Conversion Notice within such ten Business Day period
to have been made in good faith by such Holder, then such Person who
discovers such error shall have the right to notify the other such Person of
such error within such period of ten Business Days. The following provisions
shall apply with respect to errors so identified and with respect to which
such notice is given within such ten Business Day period:
(A) In case the number of shares of Common Stock issued to such
Holder in connection with such conversion exceeds the number stated in the
applicable Conversion Notice, such Holder shall return such excess shares
of Common Stock to the Company promptly after learning that such excess
shares have been so issued.
(B) If the number of shares of Common Stock stated in such Conversion
Notice as being issuable upon such conversion is greater than the number of
shares of Common
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Stock to which such Holder is entitled on such conversion and such
greater number of shares of Common Stock shall have been issued to such
Holder, then the records maintained by the Company in accordance with
Section 8.03(b) hereof as to the amount of such Note owned by such
Holder shall be adjusted to reduce the amount thereof shown on such
records as owned by such Holder as if such amount of such Note necessary
to make such adjustment had been stated in such Conversion Notice as
being converted at the Conversion Price applicable to such Conversion
Notice.
(C) If the number of shares of Common Stock stated in such Conversion
Notice as being issuable upon such conversion is less than the number of
shares of Common Stock to which such Holder is entitled on such conversion
then, in lieu of issuing additional shares of Common Stock to correct such
error, the records maintained by the Company in accordance with Section
8.03(b) hereof as to the outstanding amount of such Note shall be adjusted
to increase the amount thereof shown on such records as owned by such
Holder as if such amount of such Note necessary to make such adjustment had
not been stated in such Conversion Notice as being converted, such
adjustment to be determined based on the Conversion Price applicable to
such Conversion Notice.
In order to implement the provisions of the immediately preceding clauses (B)
and (C), the records maintained by the Company pursuant to Section 8.03(b)
hereof may reflect fractions of the authorized denominations of Notes.
(3) In the case of any Conversion Notice given by a Holder prior
to February 1, 2000, if the Company fails to issue and deliver or cause to be
issued and delivered the certificates for the Common Stock to such Holder
pursuant to the first sentence of clause (1) of this Section 8.03(d) as and
when required to do so, in addition to any other liabilities the Company may
have hereunder and under applicable law (1) the Company shall pay or
reimburse such Holder on demand for all out-of-pocket expenses, including,
without limitation, margin interest, the cost of covering a sale (whether
such covering by such Holder or such Holder's securities broker) or the cost
of borrowing of shares of Common Stock by such Holder for purposes of
settling any trade involving a sale of shares of Common Stock made by such
Holder and the reasonable fees and expenses of legal counsel, incurred by
such Holder as a result of such failure, in each such case which the Holder
reasonably documents, and (2) such Holder may, by written notice (which may
be given by mail, courier, personal service or telephone line facsimile
transmission) or oral notice (promptly confirmed in writing) given at any
time prior to delivery to such Holder of the certificates for the shares of
Common Stock issuable upon such conversion of such Holder's Note, rescind
such conversion, whereupon such Holder shall have the right to convert such
Note thereafter in accordance herewith; PROVIDED, HOWEVER, that the Company
shall not be liable to such Holder under the preceding clause (1) to the
extent the failure of the Company to deliver or cause to be delivered such
shares of Common Stock results from fire, flood, storm, earthquake,
shipwreck, strike, war, acts of terrorism, crash involving facilities of a
common carrier, act of God or any similar event outside the control of the
Company (it being understood that the actions or failure to act of the
Conversion Agent shall not be deemed an event outside the control of the
Company except to the extent resulting from fire, flood, storm, earthquake,
shipwreck, strike, war, acts of terrorism, crash involving facilities of a
common carrier, acts of God, the bankruptcy, liquidation or reorganization of
the Conversion Agent under any bankruptcy, insolvency or other similar law or
any similar event outside the control of the Conversion Agent). In the case
of any Conversion Notice given by a Holder prior to February 1, 2000, such
Holder shall notify the Company in
42.
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writing (or by telephone conversation, confirmed in writing) as promptly as
practicable after becoming aware that shares of Common Stock issued on
conversion of such Holder's Note have not been received as provided in this
Section 8.03(d), and, upon becoming aware that shares of Common Stock have
not been so received by such Holder, thereafter use commercially reasonable
efforts to mitigate any damages or liabilities for which the Company may be
held liable to such Holder under this Section 8.03(d).
(e) No fractional shares of Common Stock shall be issued upon
conversion of any Note but, in lieu of any fraction of a share of Common
Stock which would otherwise be issuable in respect of the aggregate amount of
Notes converted at one time by the same Holder, the Company may round the
number of shares of Common Stock issued on such conversion up to the next
highest whole share or may pay lawful money of the United States of America,
based on a value of one share of Common Stock being equal to the Market Price
of the Common Stock on the date the applicable Conversion Notice is given to
the Company.
SECTION 8.04. LIMITATION ON CONVERSIONS. In connection with an
offering of shares of Common Stock solely for the account of the Company,
which offering is to be underwritten on a firm commitment basis, the Company
shall have the right, if required by the managing underwriter or managing
underwriters of such offering, to require the Holders to refrain from
publicly selling shares of Common Stock acquired upon conversion of Notes
during the Lock-up Period. The Company shall exercise such right by giving
notice of such exercise to the Holders at any time after the registration
statement for such offering has been filed with the SEC and not more than ten
or less than five Trading Days prior to the commencement of the Lock-up
Period. If the Company shall have so notified the Holders, then the Holders
shall not be entitled to sell publicly any shares of Common Stock acquired
upon conversion of Notes during the Lock-up Period. The Company shall not be
entitled to invoke its rights under this Section 8.04 more than once in any
period of 360 consecutive days. If the Company shall have exercised its
rights under this Section 8.04, then for each day in the Lock-up Period the
date specified in Section 6.07(b) of this Supplemental Indenture after which
the Company may exercise redemption rights under Section 6.07 of this
Supplemental Indenture shall be extended by one day.
SECTION 8.05. ORIGINAL INDENTURE. The conversion provision of
this Article 8 shall, in respect of any conversion on or before February 1,
2000, supersede Sections 1402, 1403, 1404 and 1409 of the Original Indenture.
ARTICLE NINE
SUNDRY PROVISIONS
SECTION 9.01. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE
COMPANY. Except to the extent modified by this Supplemental Indenture, the
Company makes and reaffirms as of the date of execution of this Supplemental
Indenture all of its representations, warranties, covenants and agreements
set forth in the Original Indenture.
SECTION 9.02. TRUSTEE NOT RESPONSIBLE FOR RECITALS. The recitals
contained herein shall be taken as the statements of the Company, and the
Trustee assumes no responsibility for their correctness. The Trustee makes
no representation as to the validity of this Supplemental Indenture.
43.
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SECTION 9.03. EFFECT OF HEADINGS AND TABLE OF CONTENTS. The
Article and Section headings herein are for convenience only and shall not
affect the construction hereof.
SECTION 9.04. SUCCESSORS AND ASSIGNS. All covenants and
agreements in this Supplemental Indenture by the Company shall bind its
successors and assigns, whether so expressed or not.
SECTION 9.05. SEPARABILITY CLAUSE. In case any provision in this
Supplemental Indenture shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not
in any way be affected or impaired thereby.
SECTION 9.06. BENEFITS OF SUPPLEMENTAL INDENTURE. Nothing in this
Supplemental Indenture, express or implied, shall give to any Person, other
than the parties hereto, any Paying Agent, any Note Registrar and their
successors under the Original Indenture and the Holders of Notes, any benefit
or any legal or equitable right, remedy or claim under the Original Indenture.
SECTION 9.07. GOVERNING LAW. This Supplemental Indenture shall be
governed by and construed in accordance with the laws of the State of New
York.
SECTION 9.08. COUNTERPARTS. This Supplemental Indenture may be
executed in any number of counterparts, each of which so executed shall be
deemed to be an original, but all such counterparts shall together constitute
but one and the same instrument.
SECTION 9.09. ENFORCEABLE OBLIGATION. The Company represents and
warrants that at the time of the original issuance of each Note it received
the full purchase price payable pursuant to the Note Purchase Agreement
pursuant to which such Note is being issued in an amount at least equal to
the original principal amount of such Note, and that each Note is an
enforceable obligation of the Company which is not subject to any offset,
reduction, counterclaim or disallowance of any sort.
44.
<PAGE>
SECTION 9.10. CERTAIN AMOUNTS. Whenever pursuant to this
Supplemental Indenture or any Note the Company is required to pay an amount
in excess of the outstanding principal amount (or the portion thereof
required to be paid at that time) of such Note plus accrued and unpaid
interest plus Default Interest on such interest on such Note, the Company
agrees with the Trustee for the benefit of each Holder of Notes that the
actual damages to a Holder of Notes from the receipt of cash payment on a
Note may be difficult to determine and the amount to be so paid by the
Company represents stipulated damages and not a penalty and is intended to
compensate the Holder in part for loss of the opportunity to convert such
Note and to earn a return from the sale of shares of Common Stock acquired
upon conversion of such Note at a price in excess of the price paid for such
shares pursuant to such Note. The Company hereby agrees with the Trustee for
the benefit of each Holder of Notes that such amount of stipulated damages is
not plainly disproportionate to the possible loss to a Holder from the
receipt of a cash payment without the opportunity to convert such Note into
shares of Common Stock.
SECTION 9.11. AMENDMENTS. In addition to the requirements of
Section 902 of the Original Indenture, no supplemental indenture shall,
without the consent of the Holder of each Outstanding Note affected thereby,
change the obligations of the Company to redeem or repurchase Notes pursuant
to Section 6.01 or Article Seven of this Supplemental Indenture or reduce the
Minimum Conversion Price Redemption Price or the Redemption Price.
SECTION 9.12. TRANSFERS OF NOTES. Unless a Holder shall have
obtained the prior written consent of the Company, such Holder may not sell,
assign or otherwise transfer such Holder's Note other than (1) to a Permitted
Transferee or (2) in connection with a bona fide pledge to a financial
institution.
SECTION 9.13. REFERENCE TO AND EFFECT ON ORIGINAL INDENTURE. This
Supplemental Indenture shall be construed as supplemental to the Original
Indenture and all the terms and conditions of this Supplemental Indenture
shall be deemed to be part of the terms and conditions of the Original
Indenture. Except as set forth herein, the Original Indenture heretofore
executed and delivered is hereby ratified, approved and confirmed. The
provisions of this Supplemental Indenture shall for the purposes of this
series of Securities supersede the provisions of the Original Indenture
heretofore executed and delivered to the extent such Original Indenture
heretofore executed and delivered is expressly inconsistent herewith. This
Supplemental Indenture is subject to the provisions of the Trust Indenture
Act, and shall, to the extent applicable, be governed by such provisions.
SECTION 9.14. NOTICES. Notwithstanding Sections 105 and 106 of
the Indenture, whenever under the provisions of this Indenture, this
Supplemental Indenture or the Notes any notice is required or permitted to be
given, such notice shall be in writing (except as otherwise specifically
provided in the Indenture or the Notes) and shall be sent by telephone line
facsimile transmission to such telephone line facsimile transmission number
as shall be set forth below or shall have been provided for purposes hereof
by the Person entitled to such notice or, if no such telephone line facsimile
transmission number shall have been so provided, may be sent by first class
mail (postage prepaid), personal delivery or courier (charges prepaid)
addressed as follows:
If to the Company:
Cygnus, Inc.
45.
<PAGE>
400 Penobscot Drive
Redwood City, California 94063-4719
Attention: Chief Financial Officer
Facsimile No.: (650) 369-5318
If to the Trustee:
State Street Bank and Trust Company
of California, N.A.
725 South Figueroa Street
Suite 3100
Los Angeles, California 90017
Attention: Mr. Scott Emmons
Facsimile No.: (213) 362-7357
and if to any Holder, at such Holder's telephone line facsimile transmission
number or address set forth in the Security Register for the Notes. Any
notice so sent by telephone line facsimile transmission, personal delivery or
courier shall be effective upon receipt, and any such notice sent by mail
shall be effective three Business Days after being deposited with the
facilities of the United States Postal Service. The Company or the Trustee
may change its telephone line facsimile transmission number or address for
purposes of notices under the Original Indenture and hereunder by giving
three Business Days' notice to the other, in each case with similar notice to
all of the Holders. Any Holder may change its telephone line facsimile
transmission or address for purposes of notices under the Original Indenture
or hereunder by giving three Business Days' notice to the Trustee. Whenever
under the provisions of this Supplemental Indenture a Holder is required or
permitted to give any notice to the Company and such provision also calls for
giving a copy of such notice to the Trustee, if such Holder gives such notice
to the Company but fails to give such notice to the Trustee, such failure
shall not affect the validity of such notice.
SECTION 9.15. CERTAIN ADJUSTMENTS. (a) Whenever in this
Supplemental Indenture or in the Notes it is provided that any price of a
security shall be adjusted as provided in this Section 9.15(a), then such
price shall be equitably adjusted from time to time on terms determined in
good faith by the Company's Board of Directors (provided such adjustment is
not reasonably objected to by Majority Holders within 10 days after the
giving of written notice of such adjustment):
(i) the Company shall declare or pay a dividend or make a
distribution to all holders of the outstanding Common Stock in shares of
Common Stock;
(ii) the Company shall issue rights or warrants to all holders of
its outstanding shares of Common Stock, which rights or warrants entitle
such holders (for a period expiring within forty-five (45) days after
the date fixed for the determination of stockholders entitled to receive
such rights or warrants) to subscribe for or purchase shares
46.
<PAGE>
of Common Stock at a price per share less than price (determined without
regard to this Section 9.15(a);
(iii) the outstanding shares of Common Stock shall be subdivided
into a greater number of shares of Common Stock, or the outstanding
shares of Common Stock shall be combined into a smaller number of shares
of Common Stock;
(iv) the Company shall, by dividend or otherwise, distribute to all
holders of its Common Stock shares of any class of capital stock of the
Company (other than any dividends or distributions to which clause (i)
of this Section 9.15(a) applies) or evidences of its indebtedness, cash
or other assets (including securities, but excluding any rights or
warrants referred to in clause (ii) of this Section 9.15(a) and
dividends and distributions paid exclusively in cash and excluding any
capital stock, evidences of indebtedness, cash or assets distributed
upon a merger or consolidation);
(v) the Company or any Subsidiary shall (x) by dividend or
otherwise, distribute to all holders of the Common Stock cash in, or (y)
repurchase or reacquire shares of the Common Stock for, in either case,
an aggregate amount that, combined with (1) the aggregate amount of any
other such distributions to all holders of the Common Stock made
exclusively in cash within the twelve months preceding the date of
payment of such distribution, and in respect of which no adjustment
pursuant to this clause (v) has been made, (2) the aggregate amount of
any cash plus the fair market value (as determined in good faith by a
resolution of the Board of Directors of the Company) of consideration
paid in respect of any repurchase or other reacquisition by the Company
or any Subsidiary of any shares of Common Stock made within the twelve
months preceding the date of payment of such distribution or making of
such repurchase or reacquisition, as the case may be, and in respect of
which no adjustment pursuant to this clause (v) has been made, and (3)
the aggregate of any cash plus the fair market value (as determined in
good faith by a resolution of the Board of Directors of the Company) of
consideration payable in respect of any Tender Offer by the Company or
any Subsidiary for all or any portion of the Common Stock concluded
within the twelve months preceding the date of payment of such
distribution or completion of such repurchase or reacquisition, as the
case may be, and in respect of which no adjustment pursuant to clause
(vi) of this Section 9.15(a) has been made, exceeds 10% of the product
of the Market Price (determined without regard to this Section 9.15(a))
on the date of the determination pursuant hereto TIMES the number of
shares of Common Stock outstanding on such date; or
(vi) A Tender Offer made by the Company or any Subsidiary for all or
any portion of the Common Stock shall expire and such Tender Offer (as
amended upon the expiration thereof) shall require the payment to
stockholders of the Company (based on the acceptance (up to any maximum
specified in the terms of such Tender Offer) of shares of Common Stock to
be purchased in such Tender Offer) of an aggregate consideration having a
fair market value (as determined in good faith by resolution of the Board
of Directors of the Company) that combined together with (1) the aggregate
of the cash plus the fair market value (as determined in good faith by a
resolution of the Board of Directors of the Company), as of the expiration
of such Tender Offer, of consideration payable in respect of any other
Tender Offers, by the Company or any Subsidiary for all or any portion of
the Common Stock expiring within the twelve months preceding the expiration
of such Tender
47.
<PAGE>
Offer and in respect of which no adjustment pursuant to this clause (vi)
has been made, (2) the aggregate amount of any cash plus the fair market
value (as determined in good faith by a resolution of the Board of
Directors of the Company) of consideration paid in respect of any
repurchase or other reacquisition by the Company or any subsidiary of
the Company of any shares of Common Stock made within the twelve months
preceding the expiration of such tender offer and in respect of which no
adjustment pursuant to this clause (vi) has been made, and (3) the
aggregate amount of any distributions to all holders of the Common Stock
made exclusively in cash within twelve months preceding the expiration
of such Tender Offer and in respect of which no adjustment pursuant to
clause (v) of this proviso has been made, exceeds 10% of the product of
the Market price (determined without regard to this proviso) on the date
of the determination pursuant hereto TIMES the number of shares of
Common Stock outstanding on such day; PROVIDED, HOWEVER, that no
adjustment shall be made pursuant to this clause (vi) which would
increase such price;
in each such case which occur or with respect to which "ex-" trading of the
Common Stock commences on or after the Issuance Date. Any such adjustment
shall be effective on the date that any such event occurs or trading of the
Common Stock commences. In lieu of any price adjustment pursuant to this
Section 9.15(a), equitable provision similar to that contemplated by Section
8.03(c) hereof may be effected.
(b) Whenever in this Supplemental Indenture or in the Notes it is
provided that any number of any security shall be adjusted as provided in
this Section 9.15(b), then such number shall be equitably adjusted from time
to time on terms determined in good faith by the Board of Directors for (i)
stock splits, (ii) stock dividends, (iii) combinations, (iv) capital
reorganizations and (v) similar events, in each case relating to the Common
Stock and which occur on or after the Issuance Date.
SECTION 9.16. DEFEASANCE. In connection with the exercise by the
Company of its rights under Article XIII of the Original Indenture, the
amount deposited by the Company with the Trustee to defease the Notes shall,
in addition to any amounts required to be so deposited in respect of interest
accruing on the Notes, deposit in respect of the principal amount of the
Notes an amount at least equal to (i) in the case of cash, 112% of the
principal amount of the Notes Outstanding, (ii) in the case of U.S.
Government Obligations, U.S. Government Obligations which have a maturity of
less than one year at the time of deposit and which have an aggregate
principal amount at least equal to 112% of the principal amount of the Notes
Outstanding or (iii) any combination of (i) and (ii).
SECTION 9.17. SUBORDINATION. In addition to the items enumerated
in the definition of Senior Debt in Section 101 of the Original Indenture,
the term Senior Debt shall include obligations of the Company for deferred
compensation of employees of the Company. For the purposes of the Indenture,
the indebtedness of the Company to Silicon Valley Bank pursuant to that
certain Loan and Security Agreement between the Company and Silicon Valley
Bank dated as of June 24, 1996 and that certain Loan and Security Agreement
between the Company and Silicon Valley Bank dated as of December 21, 1994 (as
such agreements may be amended, restated, supplemented or otherwise modified
from time to time) shall be Designated Senior Debt.
48.
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IN WITNESS WHEREOF, the parties hereto have caused this
Supplemental Indenture to be duly executed, and their respective corporate
seals to be hereunto affixed and attested, all as of the day and year first
above written.
CYGNUS, INC.
By:
_________________________________
STATE STREET BANK AND TRUST
COMPANY OF CALIFORNIA, N.A.,
AS TRUSTEE
By:
_________________________________
49.
<PAGE>
State of )
ss.:
County of )
On the day of , 1998, before me personally came , to
me known, who, being by me duly sworn, did depose and say that she or he
resides at , that she or he is of
CYGNUS, INC., one of the corporations described in and which executed the
above instrument; that she or he knows the corporate seal of said
corporation; that the seal affixed to said instrument is said seal of said
corporation; that the seal affixed to said instrument is said corporate seal;
that it was so affixed by the authority of the Board of Directors of said
corporation; and that she or he signed her or his name thereto by like
authority.
(SEAL)
[Notary Signature and Stamp]
State of )
ss.:
County of )
On the day of , 1998, before me personally came , to
me known, who, being by me duly sworn, did depose and say that she or he
resides at , that she or he is of
STATE STREET BANK AND TRUST COMPANY OF CALIFORNIA, N.A., one of the
corporations described in and which executed the above instrument; that she
or he knows the corporate seal of said corporation; that the seal affixed to
said instrument is said seal of said corporation; that the seal affixed to
said instrument is said corporate seal; that it was so affixed by the
authority of the Board of Directors of said corporation; and that she or he
signed her or his name thereto by like authority.
(SEAL)
[Notary Signature and Stamp]
50.
<PAGE>
Exhibit 10.38
NOTE PURCHASE AGREEMENT
DATED AS OF FEBRUARY 3, 1998
BY AND BETWEEN
CYGNUS, INC.
AND
[NAME OF BUYER]
____________________
4% SENIOR SUBORDINATED CONVERTIBLE NOTES DUE 2005
<PAGE>
NOTE PURCHASE AGREEMENT
4% SENIOR SUBORDINATED CONVERTIBLE NOTES DUE 2005
CYGNUS, INC.
Page
----
1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. PURCHASE AND SALE; PURCHASE PRICE . . . . . . . . . . . . . . . . . 7
(a) Purchase . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(b) Form of Payment. . . . . . . . . . . . . . . . . . . . . . . . 7
(c) Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3. REPRESENTATIONS, WARRANTIES, COVENANTS, ETC. OF THE BUYER . . . . . 8
(a) Note Purchase Agreement. . . . . . . . . . . . . . . . . . . . 8
(b) Accredited Investor. . . . . . . . . . . . . . . . . . . . . . 8
(c) Short Position . . . . . . . . . . . . . . . . . . . . . . . . 8
(d) Non-contravention. . . . . . . . . . . . . . . . . . . . . . . 8
(e) Documents and Information. . . . . . . . . . . . . . . . . . . 8
(f) Certain Circumstances of Offering. . . . . . . . . . . . . . . 8
4. REPRESENTATIONS, WARRANTIES, COVENANTS, ETC. OF THE COMPANY . . . . 9
(a) Organization and Authority . . . . . . . . . . . . . . . . . . 9
(b) Qualifications . . . . . . . . . . . . . . . . . . . . . . . . 9
(c) Capitalization . . . . . . . . . . . . . . . . . . . . . . . . 9
(d) Material Losses. . . . . . . . . . . . . . . . . . . . . . . . 10
(e) Concerning the Shares and the Common Stock . . . . . . . . . . 10
(f) Corporate Authorization. . . . . . . . . . . . . . . . . . . . 10
(g) Description of Common Stock. . . . . . . . . . . . . . . . . . 11
(h) Non-contravention. . . . . . . . . . . . . . . . . . . . . . . 12
(i) Approvals. . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(j) Conduct of Business. . . . . . . . . . . . . . . . . . . . . . 12
(k) Absence of Certain Proceedings . . . . . . . . . . . . . . . . 13
(l) Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . 13
(m) Absence of Certain Changes . . . . . . . . . . . . . . . . . . 13
(n) Intellectual Property. . . . . . . . . . . . . . . . . . . . . 14
(o) Compliance with Law and Obligations. . . . . . . . . . . . . . 14
(p) Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . 15
i.
<PAGE>
(q) Registration Statement, Indenture, Etc.. . . . . . . . . . . . 15
(r) Investment Company . . . . . . . . . . . . . . . . . . . . . . 16
(s) Absence of Brokers, Finders, Etc.. . . . . . . . . . . . . . . 16
(t) Certain Issuances of Securities; Certain NASD Matters. . . . . 16
(u) Rights Agreement.. . . . . . . . . . . . . . . . . . . . . . . 16
5. CERTAIN COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . 16
(a) Nasdaq Listing; Reporting Status . . . . . . . . . . . . . . . 17
(b) Indenture; Supplemental Indenture. . . . . . . . . . . . . . . 17
(c) State Securities Laws. . . . . . . . . . . . . . . . . . . . . 17
(d) Certain Future Financings and Related Actions. . . . . . . . . 17
(e) Limitation on Certain Actions. . . . . . . . . . . . . . . . . 18
(f) Concerning the Registration Statement. . . . . . . . . . . . . 18
(g) Best Efforts . . . . . . . . . . . . . . . . . . . . . . . . . 19
(h) Debt Obligation. . . . . . . . . . . . . . . . . . . . . . . . 20
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL. . . . . . . . . . . 20
7. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE. . . . . . . . . . 20
8. INDEMNIFICATION AND CONTRIBUTION. . . . . . . . . . . . . . . . . . 22
(a) Indemnification. . . . . . . . . . . . . . . . . . . . . . . . 22
(b) Other Rights . . . . . . . . . . . . . . . . . . . . . . . . . 23
9. PURCHASABLE SHARES. . . . . . . . . . . . . . . . . . . . . . . . . 23
(a) Right to Purchase. . . . . . . . . . . . . . . . . . . . . . . 23
(b) Purchase . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(c) Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(d) Adjustment for Dividends in Other Stock, Property, Etc.;
Reclassification, Etc. . . . . . . . . . . . . . . . . . . . . 24
(e) Exercise Upon Reorganization, Consolidation, Merger, Etc. . . 25
(f) Adjustment for Extraordinary Events . . . . . . . . . . . . . 25
(g) Notices of Record Date, Etc. . . . . . . . . . . . . . . . . . 26
(h) Reservation of Stock, Etc. . . . . . . . . . . . . . . . . . . 27
(i) No Transfer . . . . . . . . . . . . . . . . . . . . . . . . . 27
(j) Certain Matters . . . . . . . . . . . . . . . . . . . . . . . 27
10. MISCELLANEOUS
(a) Governing Law . . . . . . . . . . . . . . . . . . . . . . . . 27
(b) Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
(c) Severability . . . . . . . . . . . . . . . . . . . . . . . . . 27
(d) Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
(e) Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . 28
(f) Entire Agreement; Benefit. . . . . . . . . . . . . . . . . . . 28
(g) Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
(h) Amendment. . . . . . . . . . . . . . . . . . . . . . . . . . . 28
(i) Further Assurances . . . . . . . . . . . . . . . . . . . . . . 29
(j) Assignment of Certain Rights and Obligations . . . . . . . . . 29
(k) Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
(l) Termination. . . . . . . . . . . . . . . . . . . . . . . . . . 29
(m) Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
(n) Press Release, Public Announcements, Etc.. . . . . . . . . . . 30
(o) Construction . . . . . . . . . . . . . . . . . . . . . . . . . 30
ii.
<PAGE>
ANNEXES
Annex I Buyer Escrow Instructions
Annex II Form of Conversion Agent Agreement
Annex III Form of Prospectus Supplement
Annex IV Form of First Supplemental Indenture to be dated as of
February 3, 1998
Annex V Form of Opinion of Brobeck Phleger & Harrison LLP, Counsel for the
Company, to Be Delivered to the Buyer on the Closing Date
Annex VI Form of Opinion of Patent Counsel for the Company, to Be Delivered
to the Buyer on the Closing Date
iii.
<PAGE>
NOTE PURCHASE AGREEMENT
THIS NOTE PURCHASE AGREEMENT, dated as of February 3, 1998 (this
"Agreement"), by and between CYGNUS, INC., a Delaware corporation (the
"Company"), with headquarters located at 400 Penobscot Drive, Redwood City,
California 94063-4719, and [NAME OF BUYER] (the "Buyer").
W I T N E S S E T H:
WHEREAS, the Buyer wishes to purchase from the Company and the Company
wishes to sell to the Buyer, upon the terms and subject to the conditions of
this Agreement, convertible promissory notes of the Company having the aggregate
principal amount set forth on the signature page of this Agreement, to be issued
by the Company pursuant to the Indenture (such capitalized term and all other
capitalized terms used herein having the respective meanings provided herein)
and the Supplemental Indenture and which will be convertible into shares of
Common Stock; and
WHEREAS, the Company has filed the Registration Statement relating to
debt and equity securities, which has been declared effective by the SEC, and is
offering a portion of such securities to the Buyer to be purchased pursuant to
this Agreement and the Prospectus;
NOW THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
1. DEFINITIONS
(a) As used in this Agreement, the terms "Agreement," "Buyer" and
"Company" shall have the respective meanings assigned to such terms in the
introductory paragraph of this Agreement.
(b) All the agreements or instruments herein defined shall mean such
agreements or instruments as the same may from time to time be supplemented or
amended or the terms thereof waived or modified to the extent permitted by, and
in accordance with, the terms thereof and of this Agreement.
(c) Capitalized terms defined herein by reference to another
agreement or instrument which, on the date of execution and delivery of this
Agreement, has not been executed and delivered by the parties thereto shall
nonetheless have the meanings set forth in the form of such other agreement or
instrument referred to in this Agreement until execution of such other agreement
or instrument and, following execution and delivery of such other agreement or
instrument, shall have the meanings set forth in such other agreement or
instrument as so executed and delivered.
<PAGE>
(d) The following terms shall have the following meanings (such
meanings to be equally applicable to both the singular and plural forms of the
terms defined):
"Affiliate" means, with respect to any person, any other person that
directly, or indirectly through one or more intermediaries, controls, is
controlled by or is under common control with the subject person. For purposes
of this definition, "control" (including, with correlative meaning, the terms
"controlled by" and "under common control with"), as used with respect to any
person, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of such person,
whether through the ownership of voting securities or by contract or otherwise.
"Business Day" means any day other than a Saturday, Sunday or a day on
which commercial banks in New York, New York, San Francisco, California or the
city in which the Corporate Trust Office is located are authorized or required
by law or executive order to remain closed.
"Buyer Escrow Agent" means the escrow agent identified in the Buyer
Escrow Instructions.
"Buyer Escrow Instructions" means the Buyer Escrow Instructions
attached hereto as ANNEX I.
"Claims" means any losses, claims, damages, liabilities or expenses
(joint or several), incurred by an Indemnified Person.
"Closing Date" means 12:00 noon, New York City time, on February 4,
1998 or such other mutually agreed to time.
"Common Stock" means the Common Stock, par value $.001 per share, of
the Company, together with the related Preferred Stock Purchase Rights (until
such time as such rights are no longer applicable or the Rights Agreement is
terminated) or similar rights of the Company applicable to the Common Stock
generally, or any shares of capital stock and the related rights into which such
class of stock or such rights shall be changed or reclassified after the Closing
Date.
"Conversion Agent Agreement" means the Conversion Agent Agreement to
be entered into by and among the Company, the Transfer Agent and the Trustee for
the benefit of the holders of the Notes and the Other Notes in the form attached
hereto as ANNEX II.
"Conversion Notice" means a Notice of Conversion of 4% Senior
Subordinated Convertible Notes due 2005 substantially in the form to be set
forth in Section 2.04 of the
2.
<PAGE>
Supplemental Indenture.
"Conversion Shares" means the shares of Common Stock issuable upon
conversion of the Notes.
"Corporate Trust Office" shall have the meaning to be provided in the
Indenture.
"Direct Common Stock Offering" means the proposed sale by the Company
for cash of 905,740 shares of Common Stock registered pursuant to the
Registration Statement, which sale shall be made directly to the purchasers of
such shares.
"Event of Default" shall have the meaning to be provided in the
Supplemental Indenture.
"Indemnified Person" means the Buyer, the directors, if any, of the
Buyer, the officers and other agents, if any, of the Buyer, the investment
advisors to the Buyer and each person, if any, who controls the Buyer within the
meaning of the 1933 Act or the 1934 Act.
"Indenture" means the Indenture, to be dated as of February 4, 1998,
by and between the Company and the Trustee in the form filed as Exhibit 4.2 to
the Registration Statement.
"Interest Shares" means the shares of Common Stock issuable in payment
of interest on the Notes.
"Majority Holders" means at any time the Persons who are holders of
Notes and Other Notes which, based on the original principal amount thereof,
represent a majority of the original aggregate principal amount of the Notes,
and the Other Notes, whether or not outstanding at such time.
"NASD" means the National Association of Securities Dealers, Inc.
"Nasdaq" means the Nasdaq National Market.
"1996 10-K" means the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1996, as amended by Amendment No. 1 thereto on
Form 10-K/A.
"1933 Act" means the Securities Act of 1933, as amended.
"1934 Act" means the Securities Exchange Act of 1934, as amended.
"1939 Act" means the Trust Indenture Act of 1939, as amended.
3.
<PAGE>
"1939 Act Rules and Regulations" means the rules and regulations of
the SEC under the 1939 Act.
"Notes" means the 4% Senior Convertible Notes due 2005 of the Company
to be issued pursuant to the Indenture and the Supplemental Indenture in the
form provided for in Section 2.02 of the Supplemental Indenture.
"Other Note Purchase Agreements" means the several Note Purchase
Agreements, dated as of the date hereof, by and between the Company and the
respective buyers named therein pursuant to which the Other Notes are being
issued.
"Other Notes" shall mean the 4% Senior Subordinated Convertible Notes
due 2005 issuable pursuant to the Other Note Purchase Agreement.
"Permitted Transferee" means any Person who is (A) an Affiliate of the
Buyer, (B) the holder of any Other Note (provided that such holder is an
authorized holder thereof pursuant to this Agreement or the Other Note Purchase
Agreements), (C) an Affiliate of the holder of any Other Note (provided that
such holder is an authorized holder thereof pursuant to this Agreement or the
Other Note Purchase Agreements), and (D) any Person who has the same principal
investment adviser as, or whose principal investment adviser is an Affiliate of
the principal investment adviser to, the Buyer or any Person identified in the
preceding clauses (A) through (C), and in any such case to whom Notes are being
transferred which have a principal amount equal to at least 20% of the principal
amount of the Notes outstanding on the date of such transfer, but in no event
less than $1,500,000 (or equal to such lesser principal amount of the Notes held
by the Buyer at the time of such transfer).
"Person" shall have the meaning to be provided in the Indenture.
"Preferred Stock Purchase Rights" shall have the meaning to be
provided in the Supplemental Indenture.
"Prospectus" means the Prospectus, dated November 12, 1997, forming
part of the Registration Statement, as supplemented by the Prospectus
Supplement, including any documents and reports incorporated therein by
reference.
"Prospectus Supplement" means the Prospectus Supplement in the form
attached hereto as ANNEX III, to be filed with the SEC as provided in
Section 5(f).
"Purchasable Shares" means the shares of Common Stock which may be
purchased
4.
<PAGE>
by the Buyer pursuant to Section 9.
"Purchase Price" means the purchase price for the Notes set forth on
the signature page of this Agreement.
"Registration Statement" means the Registration Statement on Form S-3
of the Company under the 1933 Act (Registration No. 333-39275), including any
documents or reports incorporated therein by reference.
"Repurchase Event" shall have the meaning to be provided in the
Supplemental Indenture.
"Rights Agreement" shall have the meaning to be provided in the
Supplemental Indenture.
"Rule 415" means Rule 415 under the 1933 Act or any successor rule
providing for offering securities on a delayed or continuous basis.
"Rule 144" means Rule 144 promulgated under the 1933 Act or any other
similar rule or regulation of the SEC that may at any time permit a holder of
any securities to sell securities of the Company to the public without
registration under the 1933 Act.
"Rules and Regulations" means the rules and regulations of the SEC
under the 1933 Act.
"SEC" means the Securities and Exchange Commission.
"SEC Effective Date" means the date the Registration Statement was
declared effective by the SEC.
"SEC Reports" means the 1996 10-K, the Company's Quarterly Reports on
Form 10-Q for the quarters ended March 31, 1997, June 30, 1997 and September 30,
1997, and the Company's definitive Proxy Statement for its 1997 Annual Meeting
of Stockholders, in each case as filed with the SEC.
"Securities" means, collectively, the Note and the Conversion Shares.
"Shares" means the Conversion Shares and the Interest Shares.
"Stockholder Approval" shall have the meaning to be provided in the
Supplemental
5.
<PAGE>
Indenture.
"Subsidiary" means any corporation or other entity of which a majority
of the capital stock or other ownership interests having ordinary voting power
to elect a majority of the board of directors or other persons performing
similar functions are at the time directly or indirectly owned by the Company.
"Supplemental Indenture" means the First Supplemental Indenture, to be
dated as of February 4, 1998, by and between the Company and the Trustee in the
form attached hereto as ANNEX IV.
"Transaction Documents" means, collectively, this Agreement, the
Indenture, the Supplemental Indenture, the Notes, the Conversion Agent Agreement
and the other agreements, instruments and documents contemplated hereby and
thereby.
"Transfer Agent" means Chase Mellon Shareholder Services L.L.C. or any
successor thereof serving as transfer agent and registrar for the Common Stock.
"Trustee" means State Street Bank and Trust Company of California,
N.A., as Trustee.
"Violations" means
(i) any untrue statement or alleged untrue statement of a material
fact contained in the Registration Statement or the omission or alleged omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading,
(ii) any untrue statement or alleged untrue statement of a material
fact contained in any Prospectus (as amended or supplemented, if the Company
files any amendment thereof or supplement thereto with the SEC on or prior to
the Closing Date) or the omission or alleged omission to state therein any
material fact necessary to make the statements made therein, in light of the
circumstances under which the statements therein were made, not misleading,
(iii) any violation or alleged violation by the Company of the
1933 Act, the 1934 Act, any state securities law or any rule or regulation under
the 1933 Act, the 1934 Act or any state securities law, or
(iv) any breach or alleged breach by the Company of any
representation, warranty, covenant, agreement or other term of any of the
Transaction Documents.
6.
<PAGE>
2. PURCHASE AND SALE; PURCHASE PRICE
(a) PURCHASE. The Buyer hereby agrees to purchase, and the Company
hereby agrees to sell to the Buyer, on the Closing Date, the Notes in the
aggregate principal amount set forth on the signature page of this Agreement and
having the terms and conditions to be set forth in the Indenture and the
Supplemental Indenture.
(b) FORM OF PAYMENT. On or before the Closing Date, the Buyer shall
deposit an amount equal to the Purchase Price in escrow by delivering funds in
United States Dollars in the amount of the Purchase Price to the Buyer Escrow
Agent against delivery by the Company of the Notes, duly executed on behalf of
the Company, to the Buyer on or prior to the Closing Date. Delivery of the
Purchase Price to the Buyer Escrow Agent shall be made by wire transfer of funds
to:
Bank of America
ABA: 121000358
Account #: 1664707613
Account Name: Brobeck, Phleger & Harrison LLP
Identifier: 020422.0010
Such funds shall at all times remain the property of the Buyer, subject to the
terms of the Buyer Escrow Instructions, until required to be released to the
Company in accordance with the Buyer Escrow Instructions. By signing this
Agreement, the Buyer agrees to all of the terms and conditions of, and becomes a
party to, the Buyer Escrow Instructions, all of the provisions of which are
incorporated herein by this reference as if set forth in full. Neither the
Company nor any creditor or stockholder of the Company or any person claiming
rights by, through or on behalf of the Company shall have any claim, lien,
equity, encumbrance or other right to or in respect of the funds or any other
property held pursuant to the Buyer Escrow Instructions prior to satisfaction of
the conditions to the release thereof to the Company in accordance with the
terms of this Agreement and the Buyer Escrow Instructions.
(c) CLOSING. The issuance and sale of the Notes shall occur on the
Closing Date at the Law Offices of Brian W Pusch, Penthouse Suite, 29 West 57th
Street, New York, New York. At the closing on the Closing Date (1) the Buyer
will pay the Purchase Price to the Company by release of an amount equal thereto
under the Buyer Escrow Instructions and (2) the Company will deliver the Notes
to the Buyer or its designee.
7.
<PAGE>
3. REPRESENTATIONS, WARRANTIES, COVENANTS, ETC. OF THE BUYER
The Buyer represents and warrants to, and covenants and agrees with,
the Company as follows:
(a) NOTE PURCHASE AGREEMENT. The Buyer has all requisite power and
authority, corporate or otherwise, to execute, deliver and perform its
obligations under this Agreement and the other agreements executed by the Buyer
in connection herewith and to consummate the transactions contemplated hereby
and thereby; and this Agreement has been duly and validly authorized, duly
executed and delivered by the Buyer and, assuming due execution and delivery by
the Company, is a valid and binding agreement of the Buyer enforceable in
accordance with its terms, except as the enforceability hereof may be limited by
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or
other similar laws now or hereafter in effect relating to or affecting
creditors' rights generally and general principles of equity, regardless of
whether enforcement is considered in a proceeding in equity or at law.
(b) ACCREDITED INVESTOR. The Buyer is an "accredited investor" as
that term is defined in Rule 501 of Regulation D.
(c) SHORT POSITION. The Buyer and, to the best of Buyer's knowledge,
the Buyer's Affiliates do not as of the date of this Agreement and will not as
of the Closing Date, directly or indirectly, maintain a short position in the
Common Stock resulting from a "short sale" (as that term is defined in Rule 3b-3
under the 1934 Act as in effect on the date of this Agreement) or own any puts,
calls, options or other derivative securities in respect of the Common Stock.
(d) NON-CONTRAVENTION. The execution and delivery of this Agreement
and the purchase of the Notes by the Buyer pursuant hereto will not violate or
contravene any law, rule or regulation applicable to the Buyer, or any
applicable decree, judgment or order of any court, United States federal or
state regulatory body, administrative agency or other governmental body having
jurisdiction over the Buyer, except to the extent that such violation or
contravention would not have a material adverse effect on the ability of the
Buyer to perform its obligations under this Agreement.
(e) DOCUMENTS AND INFORMATION. The Buyer has received the
Registration Statement and the Prospectus, including the SEC Reports
incorporated by reference therein (but excluding certain exhibits thereto), and
has had an opportunity to review and to ask questions of the Company regarding
the Registration Statement and the Prospectus.
(f) CERTAIN CIRCUMSTANCES OF OFFERING. The Buyer first received an
offer to acquire the Notes either in connection with the preliminary prospectus
supplement, dated
8.
<PAGE>
November 25, 1997, prepared by the Company, or directly from the Company, and
the Buyer has negotiated the purchase of the Notes solely and directly with the
Company and the buyers of the Other Notes.
4. REPRESENTATIONS, WARRANTIES, COVENANTS, ETC. OF THE COMPANY
The Company represents and warrants to, and covenants and agrees with,
the Buyer that:
(a) ORGANIZATION AND AUTHORITY. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, and has all requisite corporate power and authority to (i) own, lease
and operate its properties and to carry on its business as described in the
Prospectus and as currently conducted, and (ii) in the case of the Company, to
execute, deliver and perform its obligations under this Agreement, the Notes and
the other agreements executed and delivered by the Company in connection
herewith, and to consummate the transactions contemplated hereby and thereby.
The Company has no Subsidiaries other than the Subsidiaries listed in Exhibit 21
to the 1996 10-K; none of such Subsidiaries is material to the Company. Except
for the stock of the Subsidiaries and as disclosed in the Registration
Statement, the Company does not own, directly or indirectly, any shares of stock
or any other equity or long-term debt securities of any corporation or have any
equity interest in any firm, partnership, limited liability company, joint
venture, association or other entity (other than a minority interest in a
non-affiliated Company, which interest is not material to the Company).
(b) QUALIFICATIONS. The Company and each Subsidiary is duly
qualified to do business as a foreign corporation and is in good standing in all
jurisdictions wherein such qualification is necessary and where failure so to
qualify could have a material adverse effect on the business, properties,
operations, condition (financial or other), results of operations or prospects
of the Company and the Subsidiaries taken as a whole.
(c) CAPITALIZATION. The capitalization of the Company as of
September 30, 1997 was as set forth in the Prospectus; the authorized Common
Stock consists of 30,000,000 shares, of which 19,273,817 shares were outstanding
on January 26, 1998; no shares of preferred stock of the Company are
outstanding; and on the Closing Date there will be no material increase in the
number of shares of Common Stock outstanding (except for not more than 10,000
shares issued upon the exercise of options and warrants outstanding on the date
hereof and except for any sale of shares of Common Stock which may be made
pursuant to the Direct Common Stock Offering) and no increase in the number of
shares of preferred stock outstanding. The Company does not have outstanding
any securities convertible into, exchangeable for, or otherwise entitling the
holder to acquire, shares of Common Stock other than options granted under the
stock option and similar plans which have been adopted by the Company and the
$6,000,000 convertible promissory note
9.
<PAGE>
issued to Sanofi S.A. which is referenced in the Prospectus; and there will
be no antidilution or similar adjustment to such stock options which arises
by reason of issuance of the Notes and the Other Notes or the conversion
thereof in accordance with their terms or the issuance of the Purchasable
Shares pursuant hereto. The outstanding shares of Common Stock have been
duly authorized and validly issued and are fully paid and nonassessable.
None of the holders of such outstanding shares of Common Stock is subject to
personal liability solely by reason of being such a holder. None of the
outstanding shares of Common Stock or options to purchase shares of Common
Stock has been issued in violation of the preemptive rights of any
securityholder of the Company. No holder of any of the Company's securities
has any rights, "demand," "piggy-back" or otherwise, to have such securities
registered by reason of the intention to file, filing or effectiveness of the
Registration Statement.
(d) MATERIAL LOSSES. Except as disclosed in the Prospectus, since
December 31, 1996, the Company has not sustained any loss or interference with
its business or properties from fire, flood, hurricane, accident or other
calamity, whether or not covered by insurance, or from any labor dispute or
court or governmental action, order or decree, which loss or interference would
be material to the business, properties, operations, condition (financial or
other), results of operations or prospects of the Company and the Subsidiaries
taken as a whole.
(e) CONCERNING THE SHARES AND THE COMMON STOCK. The Shares and the
Purchasable Shares have been duly authorized and the Conversion Shares, when
issued upon conversion of the Notes, and the Interest Shares, when issued in
payment of interest on the Notes, and the Purchasable Shares, when issued
pursuant to this Agreement, will be duly and validly issued, fully paid and
non-assessable and will not subject the holder thereof to personal liability by
reason of being such holder. The holders of outstanding shares of capital stock
of the Company are not entitled to preemptive or other rights to subscribe for
the Shares or to purchase or otherwise acquire the Notes. The Company has duly
reserved 3,854,763 shares of Common Stock for issuance upon conversion of the
Notes and the Other Notes, and such shares shall remain so reserved, and the
Company shall from time to time reserve such additional shares of Common Stock
as shall be required to be reserved pursuant to the Notes and the Supplemental
Indenture, as long as the Notes are outstanding. The Common Stock is listed for
trading on Nasdaq and (1) the Company and the Common Stock, to the Company's
knowledge, meet the criteria for continued listing and trading on Nasdaq; (2)
the Company has not been notified since December 31, 1995 by the NASD of any
failure or potential failure to meet the criteria for continued listing and
trading on Nasdaq (other than in connection with the Company's settlement with
Sanofi, S.A., which matter the Company believes has been resolved to the
satisfaction of Nasdaq) and (3) no suspension of trading in the Common Stock is
in effect. The Company knows of no reason why the Shares will not be eligible
for listing on Nasdaq.
(f) CORPORATE AUTHORIZATION. The Transaction Documents have been
duly and validly authorized by the Company; this Agreement has been duly
executed and delivered by
10.
<PAGE>
the Company and, assuming due execution and delivery by the Buyer, this
Agreement is, and the Indenture and the Supplemental Indenture will be, when
duly executed and delivered by the Company and the Trustee, and the
Conversion Agent Agreement will be, when executed and delivered by the
Company, the Trustee and the Conversion Agent, valid and binding obligations
of the Company enforceable in accordance with their respective terms, except
as the enforceability thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or other similar laws now
or hereafter in effect relating to or affecting creditors' rights generally
and general principles of equity, regardless of whether enforcement is
considered in a proceeding in equity or at law; and the Notes have been duly
and validly authorized and, when authenticated by the Trustee and issued,
delivered and sold in accordance with this Agreement, the Indenture and the
Supplemental Indenture, will have been duly and validly executed,
authenticated, issued and delivered and will constitute valid and binding
obligations of the Company, enforceable against the Company in accordance
with their respective terms (except as the enforceability thereof may be
limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance or other similar laws now or hereafter in effect relating to or
affecting creditors' rights generally and general principles of equity,
regardless of whether enforcement is considered in a proceeding in equity or
at law) and entitled to the benefits provided by the Indenture and the
Supplemental Indenture.
(g) DESCRIPTION OF COMMON STOCK. The description of the Common Stock
in the Registration Statement and the Prospectus is, and at the Closing Date
will be, complete and accurate in all material respects.
11.
<PAGE>
(h) NON-CONTRAVENTION. The execution and delivery of the
Transaction Documents by the Company and the consummation by the Company of
the issuance of the Securities and the other transactions contemplated by the
Transaction Documents do not and will not, with or without the giving of
notice or the passage of time, or both, (i) result in any violation of any
term of the certificate of incorporation or by-laws of the Company, (ii)
conflict with or result in a breach by the Company of any of the terms or
provisions of, or constitute a default under, or result in the modification
of, or result in the creation or imposition of any lien, security interest,
charge or encumbrance upon any of the properties or assets of the Company
pursuant to, any indenture, mortgage, deed of trust or other agreement or
instrument to which the Company or any Subsidiary is a party or by which the
Company or any Subsidiary or any of their respective properties or assets are
bound or affected which conflict, breach, default, modification, lien,
security interest, charge or encumbrance would have a material adverse effect
on the business, properties, operations, condition (financial or other) or
results of operations of the Company and the Subsidiaries, taken as a whole,
or the transactions contemplated by the Transaction Documents or the
authority or ability of the Company to perform its obligations under the
Transaction Documents, (iii) violate or contravene any applicable law, rule
or regulation or any applicable decree, judgment or order of any court,
United States federal or state regulatory body, administrative agency or
other governmental body having jurisdiction over the Company or any
Subsidiary or any of their respective properties or assets which violation or
contravention would have a material adverse effect on the business,
properties, operations, condition (financial or other) or results of
operations of the Company and Subsidiaries, taken as a whole, or the
transactions contemplated by the Transaction Documents or the authority or
ability of the Company to perform its obligations under the Transaction
Documents, or (iv) have any material adverse effect on any permit,
certification, registration, approval, consent, license or franchise
necessary for the Company or any Subsidiary to own or lease and operate any
of its material properties and to conduct its business or to make use thereof.
(i) APPROVALS. No authorization, approval or consent of, or
filing with, any court, governmental body, regulatory agency, self-regulatory
organization, or stock exchange or market or the stockholders of the Company
is required to be obtained or made by the Company in connection with the
execution, delivery and performance of the Transaction Documents and the
issuance and sale of the Securities as contemplated by this Agreement and the
terms of the Notes, other than (1) such as have been obtained or made under
the 1933 Act and the Rules and Regulations and the 1939 Act and the 1939 Act
Rules and Regulations, (2) listing of the Shares on Nasdaq, (3) as may be
required under applicable state securities or "blue sky" laws, and (4) the
filing of the Prospectus Supplement with the SEC.
(j) CONDUCT OF BUSINESS. Except as set forth in the Prospectus,
since December 31, 1996, neither the Company nor any Subsidiary has (i)
incurred any material obligation or liability (absolute or contingent) other
than in the ordinary course of business; (ii) canceled, without payment in
full, any material notes, loans or other obligations receivable or other
12.
<PAGE>
debts or claims held by it other than in the ordinary course of business;
(iii) sold, assigned, transferred, abandoned, mortgaged, pledged or subjected
to lien any of its material properties, tangible or intangible, or rights
under any material contract, permit, license, franchise or other agreement;
(iv) conducted its business in a manner materially different from its
business as conducted on such date; (v) declared, made or paid or set aside
for payment any cash or non-cash distribution on any shares of its capital
stock; or (vi) consummated, or entered into any agreement with respect to,
any transaction or event which would constitute a Repurchase Event.
(k) ABSENCE OF CERTAIN PROCEEDINGS. Except as described in the
Prospectus, there is no action, suit, proceeding, inquiry or investigation
before or by any court, public board or body presently pending or, to the
knowledge of the Company, threatened against or affecting the Company or any
Subsidiary wherein an unfavorable decision, ruling or finding could have a
material adverse effect on the business, properties, operations, condition
(financial or other), results of operations or prospects of the Company and
the Subsidiaries taken as a whole or the transactions contemplated by the
Transaction Documents or which could adversely affect the validity or
enforceability of, or the authority or ability of the Company to perform its
obligations under, the Transaction Documents; and to the best of the
Company's knowledge there is not pending or contemplated, and there has been
no, investigation by the SEC involving the Company or any director or officer
of the Company.
(l) LIABILITIES. Except as and to the extent disclosed, reflected
or reserved against in the financial statements of the Company and the notes
thereto included in the Prospectus or as otherwise described in the
Prospectus, subsequent to December 31, 1996, neither the Company nor any
Subsidiary has incurred any liability, debt or obligation of any nature
whatsoever which individually or in the aggregate are material to the Company
and the Subsidiaries taken as a whole, other than those incurred in the
ordinary course of their respective businesses.
(m) ABSENCE OF CERTAIN CHANGES. Since December 31, 1996, there
has been no material adverse change and no material adverse development in
the business, properties, operations, condition (financial or other), results
of operations or prospects of the Company and the Subsidiaries taken as a
whole, except as disclosed in the Prospectus.
13.
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(n) INTELLECTUAL PROPERTY. Except as disclosed in the Prospectus,
to the knowledge of the Company after reasonable investigation conducted in
the normal course of business, the Company and the Subsidiaries own, or are
licensed or otherwise have the right to use, the material patents, patent
rights, licenses, inventions, copyrights, know-how (including trade secrets
and other unpatented and/or unpatentable proprietary or confidential
information, systems or procedures), trademarks, services marks and trade
names (collectively, "patent and proprietary rights") presently employed by
them or which are necessary in connection with the conduct of the business
now operated by them or proposed to be conducted by them, and neither the
Company nor any Subsidiary has received any written notice or otherwise has
actual knowledge of any infringement of or conflict with asserted rights of
others or any other claims with respect to any patent or proprietary rights,
or of any basis for rendering any patent and proprietary rights invalid or
inadequate to protect the interest of the Company or any of its Subsidiaries.
(o) COMPLIANCE WITH LAW AND OBLIGATIONS. Except as disclosed in
the Prospectus, neither the Company nor any Subsidiary is in violation of any
statute, law, rule, regulation, ordinance, decision or order of any
governmental agency or body or any court, domestic or foreign, including,
without limitation, those relating to the use, operation, handling,
transportation, disposal or release of hazardous or toxic substances or
wastes or relating to the protection or restoration of the environment or
human exposure to hazardous or toxic substances or wastes, except where such
violations would not individually or in the aggregate have a material adverse
effect on the business, properties, operations, condition (financial or
other), results of operations or prospects of the Company and the
Subsidiaries taken as a whole; and the Company is not aware of any pending
investigation which would reasonably be expected to lead to such a claim
against the Company or any Subsidiary. The Company and each of the
Subsidiaries has performed in all material respects its obligations required
to be performed by it, and is not in default in any material respect, under
any indenture, mortgage, deed of trust, voting trust agreement, loan
agreement, bond, debenture, note agreement, lease, contract or other
agreement or instrument to which it is a party or by which its property is
bound or affected. To the best knowledge of the Company and each of its
Subsidiaries, no other party under any material contract or other agreement
to which it is a party is in default in any respect thereunder.
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(p) INSURANCE. The Company and each Subsidiary maintains
insurance against loss or damage by fire or other casualty and such other
insurance, including but not limited to, product liability insurance, in such
amounts and covering such risks as is to the Company's knowledge usually
maintained by companies of comparable size engaged in the same or a similar
business and in the same geographic region as the Company and the
Subsidiaries, subject to customary deductibles.
(q) REGISTRATION STATEMENT, INDENTURE, ETC. (1) The Registration
Statement has been declared effective under the 1933 Act and no stop order or
other proceeding relating to the Registration Statement is pending or
threatened. The Indenture has been qualified under the 1939 Act.
(2) The Registration Statement (including any amendments or
supplements thereto and prospectuses contained therein), at the time it was
first filed with the SEC, on the SEC Effective Date, on the date of execution
and delivery of this Agreement by the parties hereto and on the Closing Date
(and each such amendment and supplement at the time of its filing with the
SEC and on the Closing Date) did not and will not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading.
(3) The Prospectus as of its date, on the date of execution and
delivery of this Agreement by the parties hereto, and on the Closing Date did
not and will not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein, or necessary to make the
statements therein, in light of the circumstances in which they are made, not
misleading.
(4) On the SEC Effective Date, the date the Prospectus was first
filed with the SEC pursuant to Rule 424(b), on the date of execution and
delivery of this Agreement by the parties hereto and on the Closing Date and
when any amendment or supplement to the Prospectus is filed with the SEC on
or prior to the Closing Date, the Registration Statement and the Prospectus
(as amended or as supplemented if the Company shall have filed with the SEC
any amendment or supplement thereto), did and will comply with the applicable
provisions of the 1933 Act, the Rules and Regulations, the 1934 Act and the
rules and regulations thereunder, the 1939 Act and the 1939 Act Rules and
Regulations and will contain all statements required to be stated therein in
accordance with the 1933 Act, the Rules and Regulations, the 1934 Act and the
rules and regulations thereunder.
(5) On the date of execution and delivery of this Agreement by the
parties hereto and on the Closing Date, the Indenture and the Supplemental
Indenture complied and will comply with all applicable provisions of the 1939
Act and the 1939 Act Rules and Regulations.
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(6) The Company meets the requirements for use of Form S-3 for
registration of the offer and sale of the Notes and Shares to the Buyer in
accordance with Rule 415 of the Rules and Regulations. Copies of the
Registration Statement and all amendments thereto and the Prospectus
Supplement, a copy of which Prospectus Supplement is attached hereto as ANNEX
III, have been delivered to the Buyer.
(r) INVESTMENT COMPANY. The Company is not an "investment company"
or an "affiliated person" of, or "promoter" or "principal underwriter" for, an
"investment company," as such terms are defined in the Investment Company Act of
1940, as amended.
(s) ABSENCE OF BROKERS, FINDERS, ETC. The Company has engaged Diaz &
Attschal Capital LLC exclusively to provide financial transaction advice to the
Company relating to the Notes and the Company will be responsible for the fees
of Diaz & Attschal. The Company has not engaged any underwriter, placement
agent, broker, finder or similar person in connection with the transactions
contemplated by this Agreement.
(t) CERTAIN ISSUANCES OF SECURITIES; CERTAIN NASD MATTERS. The
Company has not issued any shares of Common Stock or shares of any series of
preferred stock or other securities convertible into, exchangeable for, or
otherwise entitling the holder to acquire, shares of Common Stock which are
subject to Section 4460(i)(1)(D) of the rules of the NASD since January 20,
1997. Based upon the letter, dated February 2, 1998, from the NASD to the
Company, a copy of which has been provided to the Buyer, the issuance of the
Notes and the issuance of the Conversion Shares upon conversion of the Notes or
the Interest Shares in payment of interest on the Notes are not subject to a
requirement of Nasdaq for Stockholder Approval under Rule 4460(i) of Nasdaq, and
the Company will not be limited by Rule 4460(i) of Nasdaq with respect to the
number of Conversion Shares issuable upon conversion of the Notes or Interest
Shares issued in payment of interest on the Notes in order to remain in
compliance with the listing standards of Nasdaq (it being understood that no
representation is made herein with regard to the Purchasable Shares).
(u) RIGHTS AGREEMENT. Assuming that the Buyer does not hold any
shares of Common Stock other than as acquired upon conversion of the Notes, and
subject to compliance with the limitation on the number of shares of Common
Stock that may be held by the Buyer as contained therein, the execution and
delivery of this Agreement by the Company, the issuance of the Notes as
contemplated by this Agreement, the issuance of the Conversion Shares upon
conversion of the Notes and the other transactions contemplated by the
Transaction Documents will not result in the Buyer becoming an Acquiring Person,
as defined in the Rights Agreement; and the holders of the Notes will be
entitled with respect to the Shares and the Buyer shall be entitled with respect
to the Purchasable Shares, to the benefits available to the holders of Common
Stock under the Rights Agreement.
5. CERTAIN COVENANTS
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(a) NASDAQ LISTING; REPORTING STATUS. On or before the Closing Date,
the Company will file with Nasdaq an application or other document required by
Nasdaq for the listing of the Shares with Nasdaq and shall provide evidence of
such filing to the Buyer. So long as the Buyer beneficially owns any portion of
the Notes or any Shares, the Company will use its best efforts to maintain the
listing of the Common Stock on Nasdaq or another national securities exchange.
During the period of three years following the Closing Date, the Company shall
timely file all reports required to be filed with the SEC pursuant to Section 13
or 15(d) of the 1934 Act and the Company shall not terminate its status as an
issuer required to file reports under the 1934 Act even if the 1934 Act or the
rules and regulations thereunder would permit such termination. So long as the
Buyer owns the Notes or any Conversion Shares, the Company shall (1) use its
commercially reasonable best effort to furnish to the Buyer copies of all
Current Reports on Form 8-K filed by the Company with the SEC within three
business days after each such filing and (2) furnish to the Buyer copies of all
other reports and other information filed by the Company with the SEC pursuant
to Sections 13, 14(a), 14(c) and 15(d) of the 1934 Act promptly, but in no event
later than five days, after the same are filed with the SEC, other than in the
case of this clause (2) any such report or other information which is publicly
available through the SEC's EDGAR system on or prior to such fifth day.
(b) INDENTURE; SUPPLEMENTAL INDENTURE. The Company agrees to execute
and deliver to the Trustee (1) the Indenture in the form filed as Exhibit 4.2 to
the Registration Statement and (2) the Supplemental Indenture in the form
attached hereto as ANNEX IV, in each such case on or before the Closing Date.
(c) STATE SECURITIES LAWS. On or before the Closing Date, the
Company shall take such action as shall be necessary to qualify, or to obtain an
exemption for, the Notes for sale to the Buyer pursuant to this Agreement and
the Shares for sale upon conversion of the Notes and for payment of interest on
the Notes under such of the securities laws of the States of Illinois and New
York as shall be applicable thereto. In connection with the foregoing
obligations of the Company in this Section 5(c), the Company shall not be
required (1) to qualify to do business in any jurisdiction where it would not
otherwise be required to qualify but for this Section 5(c), (2) to subject
itself to general taxation in any such jurisdiction, (3) to file a general
consent to service of process in any such jurisdiction, (4) to provide any
undertakings that cause more than nominal expense or burden to the Company or
(5) to make any change in its charter or by-laws which the Board of Directors of
the Company determines to be contrary to the best interests of the Company and
its stockholders. The Company shall furnish the Buyer with copies of all
filings, applications, orders and grants or confirmations of exemptions relating
to such securities laws on or before the Closing Date.
(d) CERTAIN FUTURE FINANCINGS AND RELATED ACTIONS. (1) The Company
shall not make any assertion or claim contrary to the interpretation of the NASD
with respect to the
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inapplicability of the Stockholder Approval requirement under NASD Rule
4460(i) to the Notes and the Shares set forth in the letter, dated February
2, 1998, from the NASD to the Company.
(2) During the period from the date of this Agreement to the date
which is one year after the Closing Date, the Company shall not, without the
prior written consent of the Majority Holders, offer, sell, contract to sell or
issue (or engage any person to assist the Company in taking any such action) any
securities convertible into, exchangeable for or otherwise entitling the holder
to acquire, any Common Stock at a price which fluctuates with the market price
of the Common Stock other than pursuant to this Agreement and the Other Note
Purchase Agreements.
(e) LIMITATION ON CERTAIN ACTIONS. From the date of execution and
delivery of this Agreement by the parties hereto to the date of issuance of the
Note, the Company (1) shall comply with Article Ten of the Indenture and Article
Five of the Supplemental Indenture as if the Notes were outstanding, (2) shall
not take any action which, if the Notes were outstanding, (A) would constitute
an Event of Default or, with the giving of notice or the passage of time or
both, would constitute an Event of Default or (B) would constitute a Repurchase
Event or, with the giving of notice or the passage of time or both, would
constitute a Repurchase Event.
(f) CONCERNING THE REGISTRATION STATEMENT.
(1) The Company will file the Prospectus Supplement, in the form
attached hereto as ANNEX III, with the SEC on or before the Closing Date. The
Company will not, on or prior to the Closing Date, file any amendment or
supplement to the Registration Statement or the Prospectus, unless a copy
thereof shall first have been submitted to the Buyer within a reasonable period
of time prior to the filing thereof and the Buyer shall not have objected
thereto in good faith.
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(2) The Company will notify the Buyer promptly, and will confirm such
advice in writing (A) of any request by the SEC on or prior to the Closing Date
for amendments or supplements to the Registration Statement or the Prospectus or
for additional information, (B) of the issuance by the SEC on or prior to the
Closing Date of any stop order suspending the effectiveness of the Registration
Statement or the initiation on or prior to the Closing Date of any proceedings
for that purpose or the threat thereof, (C) of the happening of any event prior
to the Closing Date that in the judgment of the Company makes any statement made
in the Registration Statement or the Prospectus untrue or that requires the
making of any changes in the Registration Statement or the Prospectus in order
to make the statements therein, in light of the circumstances in which they are
made, not misleading and (D) of receipt by the Company or any representative or
attorney of the Company on or prior to the Closing Date of any other
communication from the SEC relating to the Company, the Registration Statement,
any preliminary prospectus or the Prospectus. If at any time on or prior to the
Closing Date the SEC shall issue any order suspending the effectiveness of the
Registration Statement, the Company will make every reasonable effort to obtain
the withdrawal of such order at the earliest possible moment. The Company will
use its best efforts to comply with the provisions of and make all requisite
filings with the SEC pursuant to Rule 430A and to notify the Buyer promptly of
all such filings.
(3) The Company will comply with all the provisions of any
undertakings contained in the Registration Statement which are required to be
complied with on or prior to the Closing Date.
(4) The Company shall not file any document under the 1934 Act before
the termination of the offering of the Notes to the Buyer if such document would
be deemed to be incorporated by reference into the Prospectus which is not
approved by the Buyer after reasonable notice thereof.
(5) The Company shall make generally available to its security
holders as soon as practical, but not later than 90 days after the close of the
period covered thereby, an earning statement (in form complying with the
provisions of Rule 158 under the 1933 Act) covering a 12-month period beginning
not later than the first day of the Company's fiscal quarter next following the
SEC Effective Date and the first day of the Company's final quarter next
following the date the Prospectus Supplement is filed with the SEC.
(6) The Company shall use its commercially reasonable best efforts to
maintain the effectiveness of the Registration Statement or a successor
registration statement under the 1933 Act at all times that the Buyer shall have
the right to purchase any Purchasable Shares pursuant to Section 9.
(g) BEST EFFORTS. Each of the parties shall use its best efforts
timely to satisfy each of the conditions to the other party's obligations to
sell and purchase the Note set forth in
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Section 6 or 7, as the case may be, of this Agreement on or before the
Closing Date.
(h) DEBT OBLIGATION. So long as any portion of the Notes is
outstanding, the Company shall cause its books, records and financial
statements to reflect the Note as a debt of the Company in its unpaid
principal amount and, whenever appropriate, as a valid senior subordinated
debt obligation of the Company for money borrowed.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL
The Buyer understands that the Company's obligation to sell the
Notes to the Buyer pursuant to this Agreement is conditioned upon the
following (any or all of which may be waived by the Company in its sole
discretion):
(a) On the Closing Date, no legal action, suit or proceeding shall
be pending or threatened which seeks to restrain or prohibit the transactions
contemplated by this Agreement;
(b) The representations and warranties of the Buyer contained in
this Agreement shall have been true and correct on the date of this Agreement
and shall be true and correct on the Closing Date as if given on and as of
the Closing Date (except for any representation given as of a specific date,
which representation shall be true and correct as of such date), and on or
before the Closing Date the Buyer shall have performed all covenants and
agreements of the Buyer required to be performed by the Buyer on or before
the Closing Date;
(c) The Registration Statement shall continue to be effective and
no stop order or similar proceeding relating to the Registration Statement
shall be pending or threatened; and
(d) No event which, if the Notes were outstanding, (1) would
constitute an Event of Default or, with the giving of notice or the passage
of time or both, would constitute an Event of Default shall have occurred and
be continuing or (2) would constitute a Repurchase Event or, with the giving
of notice or the lapse of time, or both, would constitute a Repurchase Event
shall have occurred and be continuing.
7. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE
The Company understands that the Buyer's obligation to purchase the
Notes is conditioned upon the following (any or all of which may be waived by
the Buyer in its sole discretion):
(a) On or before the Closing Date, the Trustee shall have executed
and delivered to the Company the Indenture in the form filed as Exhibit 4.2
to the Registration Statement and the Supplemental Indenture in the form
attached hereto as ANNEX IV;
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(b) On or before the Closing Date, the Transfer Agent and the
Trustee shall have executed and delivered to the Company the Conversion Agent
Agreement in the form attached hereto as ANNEX II;
(c) On the Closing Date, no legal action, suit or proceeding shall
be pending or threatened which seeks to restrain or prohibit the transactions
contemplated by this Agreement;
(d) The representations and warranties of the Company contained in
this Agreement shall have been true and correct on the date of this Agreement
and, except for the approvals referred to in clauses (1) through (4) of
Section 4(i), which shall have been obtained on or before the Closing Date,
shall be true and correct on the Closing Date as if given on and as of the
Closing Date (except for any representation given as of a specific date,
which representation shall be true and correct as of such date), and on or
before the Closing Date the Company shall have performed all covenants and
agreements of the Company contained herein required to be performed by the
Company on or before the Closing Date;
(e) The Registration Statement shall remain effective; no
stop-order or similar proceeding relating to the Registration Statement shall
be pending or threatened; the Company shall have filed the Prospectus
Supplement with the SEC; and, on or after the date of execution and delivery
of this Agreement but on or before the Closing Date, the Company shall not
have made or filed with the SEC any amendment or supplement to the
Registration Statement or the Prospectus other than the Prospectus Supplement;
(f) No event which, if the Notes were outstanding, (1) would
constitute an Event of Default or, with the giving of notice or the passage
of time, or both, would constitute an Event of Default shall have occurred
and be continuing or (2) would constitute a Repurchase Event or, with the
giving of notice or the passage of time, or both, would constitute a
Repurchase Event shall have occurred and be continuing;
(g) The Company shall have delivered to the Buyer its certificate,
dated the Closing Date, duly executed by its President and Chief Executive
Officer to the effect set forth in subparagraphs (c), (d), (e) and (f) of
this Section 7;
(h) The receipt by the Buyer of a certificate, dated the Closing
Date, of the Secretary of the Company certifying (1) the Certificate of
Incorporation and By-Laws of the Company as in effect on the Closing Date,
(2) all resolutions of the Board of Directors (and committees thereof) of the
Company relating to this Agreement and the transactions contemplated hereby
and (3) such other matters as reasonably requested by the Buyer;
(i) The receipt by the Buyer on the Closing Date of an opinion of
Brobeck,
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Phleger & Harrison LLP, counsel for the Company, dated the Closing Date,
addressed to the Buyer, in form, scope and substance reasonably satisfactory
to the Buyer, substantially in the form of ANNEX V attached hereto, and an
opinion of patent counsel for the Company, dated the Closing Date, addressed
to the Buyer, in form, scope and substance reasonably satisfactory to the
Buyer, substantially in the form of ANNEX VI attached hereto;
(j) On the Closing Date, (i) trading in securities on the New York
Stock Exchange, Inc., the American Stock Exchange, Inc. or Nasdaq shall not
have been suspended or materially limited and (ii) a general moratorium on
commercial banking activities in the State of California or the State of New
York shall not have been declared by either federal or state authorities; and
(k) On or before the Closing Date, the Company shall have obtained
and delivered copies to the Buyer of written confirmation, in form and
substance reasonably satisfactory to the Buyer, from Silicon Valley Bank and
each lender or lessor under the Company's lease lines.
8. INDEMNIFICATION AND CONTRIBUTION
(a) INDEMNIFICATION. (1) To the extent not prohibited by
applicable law, the Company will indemnify and hold harmless each Indemnified
Person against any Claims to which any of them may become subject under the
1933 Act, the 1934 Act or otherwise, insofar as such Claims (or actions or
proceedings, whether commenced or threatened, in respect thereof) arise out
of or are based upon any Violation and relate to or result from any liability
or alleged liability of any Indemnified Person to any third party. Subject
to the restrictions set forth in Section 8(a)(2), the Company shall reimburse
each Indemnified Person, promptly as such expenses are incurred and are due
and payable, for any reasonable legal fees or other expenses incurred by them
in connection with defending any such Claim. Notwithstanding anything to the
contrary contained herein, the indemnification agreement contained in this
Section 8(a)(1) shall not apply to: (I) amounts paid in settlement of any
Claim if such settlement is effected without the prior written consent of the
Company, or (II) any Claim to the extent such Claim relates to or results
from any liability or alleged liability of such Indemnified Person to the
Buyer, any holder of the Other Notes or any of their respective Affiliates or
any Permitted Transferee thereof based upon a Violation. Such indemnity
shall remain in full force and effect regardless of any investigation made by
or on behalf of any Indemnified Person and shall survive the transfer of the
Securities by the Buyer.
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(2) Promptly after receipt by an Indemnified Person under this
Section 8(a) of notice of the commencement of any action (including any
governmental action), such Indemnified Person shall, if a Claim in respect
thereof is to be made against any indemnifying party under this Section 8(a),
deliver to the indemnifying party a notice of the commencement thereof and
the indemnifying party shall have the right to participate in, and, to the
extent the indemnifying party so desires, jointly with any other indemnifying
party similarly noticed, to assume control of the defense thereof with
counsel reasonably satisfactory to the Indemnified Person; PROVIDED, HOWEVER,
that an Indemnified Person shall have the right to retain its own counsel
with the fees and expenses to be paid by the indemnifying party, if, in the
reasonable opinion of counsel retained by the indemnifying party, the
representation by such counsel of the Indemnified Person and the indemnifying
party would be inappropriate due to actual or potential differing interests
between such Indemnified Person and any other party represented by such
counsel in such proceeding; PROVIDED, FURTHER, HOWEVER, that, to the extent
practicable, any such additional counsel shall only be retained with respect
to the specific claims involving differing interests. The failure to deliver
notice to the indemnifying party within a reasonable time of the commencement
of any such action shall not relieve such indemnifying party of any liability
to the Indemnified Person or Indemnified Party under this Section 8(a),
except to the extent that the indemnifying party is prejudiced in its ability
to defend such action.
(b) OTHER RIGHTS. The indemnification provided in this Section
shall be in addition to any other rights or remedies available at law or in
equity.
9. PURCHASABLE SHARES
(a) RIGHT TO PURCHASE. The Buyer shall have the right (up to 30
days) to purchase from the Company at any time or from time to time prior to
expiration as provided in this Section 9, the number of shares of Purchasable
Shares shown on the signature page of this Agreement at the price per share
shown on the signature page of this Agreement, subject to adjustment as
provided in Sections 9(d), 9(e) and 9(f). The Buyer is not giving any
consideration for the rights under this Section 9.
(b) PURCHASE.
(1) In order to purchase any Purchasable Shares, the Buyer shall
give a notice to the Company which sets forth the number of Purchasable
Shares to be purchased by the Buyer and the aggregate purchase price therefor.
(2) The closing of each purchase of Purchasable Shares pursuant hereto
shall occur on the date which is ten Business Days after the Buyer shall have
given the notice specified in Section 9(b)(1) or such other date as mutually
agreed by the Company and the Buyer, subject to the right of the Company by
notice to the Buyer to delay such closing for a reasonable period of time
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(up to 30 days) based on the Registration Statement not being available for
sales of Purchasable Shares (each, a "Purchasable Share Closing Date").
(3) Prior to each Purchasable Share Closing Date, the Company shall
prepare and file with the SEC, and deliver to the Buyer, such supplement, if
any, to the Prospectus as the Company determines is required to sell the
Purchasable Shares to the Buyer on such Purchasable Share Closing Date.
(4) The right to purchase the Purchasable Shares as provided for in
this Section 9 shall expire upon the earlier to occur of (A) February 3,
2001; or (B) expiration thereof in accordance with the proviso in Section
9(e).
(c) CLOSING. On each Purchasable Share Closing Date, the Company
shall issue and deliver to the Buyer the number of Purchasable Shares
issuable pursuant hereto on such Purchasable Share Closing Date and the Buyer
shall make payment in same day funds to the Company of an amount equal to the
aggregate purchase price of such Purchasable Shares.
(d) ADJUSTMENT FOR DIVIDENDS IN OTHER STOCK, PROPERTY, ETC.;
RECLASSIFICATION, ETC. In case at any time or from time to time, all the
holders of Common Stock shall have received, or (on or after the record date
fixed for the determination of stockholders eligible to receive) shall have
become entitled to receive, without payment therefor,
(1) other or additional stock or other securities or property (other
than cash) by way of dividend, or
(2) any cash (excluding cash dividends payable solely out of earnings
or earned surplus of the Company), or
(3) other or additional stock or other securities or property
(including cash) by way of spin-off, split-up, reclassification,
recapitalization, combination of shares or similar corporate rearrangement,
other than additional shares of Common Stock issued as a stock dividend or in
a stock-split (adjustments in respect of which are provided for in Section
9(f)), then and in each such case the Buyer, upon the purchase of Purchasable
Shares as provided in this Section 9, shall be entitled to receive the amount
of stock and other securities and property (including cash in the cases
referred to in subdivisions (2) and (3) of this Section 9(d)) which the Buyer
would hold on the date of such exercise if on the date thereof the Buyer had
been the holder of record of the number of shares of Common Stock included in
the Purchasable Shares and had thereafter, during the period from the date
thereof to and including the date of such exercise, retained such shares and
all such other or additional stock and other securities and property
(including cash in the case referred to in
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subdivisions (2) and (3) of this Section 9(d)) receivable by the Buyer as
aforesaid during such period, giving effect to all adjustments called for
during such period by Section 9(e).
(e) EXERCISE UPON REORGANIZATION, CONSOLIDATION, MERGER, ETC. In
case at any time or from time to time, the Company shall (1) effect a
reorganization, (2) consolidate with or merge into any other Person, (3)
effect an exchange of outstanding shares of the Company for securities of any
other Person or (4) transfer all or substantially all of its properties or
assets to any other Person under any plan or arrangement contemplating the
dissolution of the Company, then, in each such case, as a condition of such
reorganization, consolidation, merger, share exchange, sale or conveyance,
the Company shall cause effective provisions to be made so that the Buyer
shall have the right thereafter, upon purchase of Purchasable Shares (in lieu
of the shares of Common Stock of the Company purchasable and receivable upon
exercise of the rights represented hereby immediately prior to such
transaction) to purchase the kind and amount of shares of stock and other
securities and property (including cash) receivable upon such reorganization,
consolidation, merger, share exchange, sale or conveyance by a holder of the
number of shares of Common Stock that might have been received upon purchase
of Purchasable Shares immediately prior to such reorganization,
consolidation, merger, share exchange, sale or conveyance; PROVIDED, HOWEVER,
that in the event (a) the value of the stock, securities or other assets or
property (determined in good faith by the Board of Directors of the Company)
issuable or payable with respect to one share of Common Stock of the Company
purchasable and receivable upon the exercise by the Buyer of the right to
purchase hereunder immediately prior to such transaction is in excess of the
purchase price per share hereunder in effect at the time of such
reorganization, consolidation, merger, share exchange, sale or conveyance
(after giving effect to any adjustment in such purchase price required to be
made under this Section 9), and (b) the securities, if any, to be received in
such reorganization, consolidation, merger, share exchange, sale or
conveyance are publicly traded or the consideration to be so received in
cash, then if the Company gives the Buyer at least 20 Business Days (or such
lesser period as the Company gives notice of such transaction to the holders
of the outstanding shares of Common Stock) prior notice of such
reorganization, merger, share exchange, sale or conveyance the Buyer's rights
under this Section 9 shall expire unless exercised prior to such
reorganization, consolidation, merger, share exchange, sale or conveyance.
Any such provision shall include provisions for adjustments in respect of
such shares of stock and other securities and property that shall be as
nearly equivalent as may be practicable to the adjustments provided for in
this Section 9. The provisions of this Section 9(e) shall apply to
successive reorganizations, consolidations, mergers, share exchanges, sales
and conveyances.
(f) ADJUSTMENT FOR EXTRAORDINARY EVENTS. In the event that the
Company shall (i) issue additional shares of the Common Stock as a dividend
or other distribution on outstanding Common Stock, (ii) subdivide or
reclassify its outstanding shares of Common Stock, or (iii) combine its
outstanding shares of Common Stock into a smaller number of shares of Common
Stock, then, in each such event, the purchase price per Purchasable Share
shall, simultaneously with the happening of such event, be adjusted by
multiplying the purchase price in effect immediately
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prior to such event by a fraction, the numerator of which shall be the number
of shares of Common Stock outstanding immediately prior to such event and the
denominator of which shall be the number of shares of Common Stock
outstanding immediately after such event, and the product so obtained shall
thereafter be the purchase price per Purchasable Share then in effect. The
purchase price per Purchasable Share, as so adjusted, shall be readjusted in
the same manner upon the happening of any successive event or events
described herein in this Section 9(f). The Buyer shall thereafter, on the
exercise of its rights hereunder, be entitled to receive that number of
shares of Common Stock determined by multiplying the number of shares of
Common Stock which would be issuable on such exercise immediately prior to
such issuance by a fraction of which (i) the numerator is the purchase price
per Purchasable Share in effect immediately prior to such issuance and (ii)
the denominator is the purchase price per Purchasable Share in effect on the
date of such exercise.
(g) NOTICES OF RECORD DATE, ETC. In the event of
(1) any taking by the Company of a record of the holders of any class
of securities for the purpose of determining the holders thereof who are
entitled to receive any dividend on, or any right to subscribe for,
purchase or otherwise acquire any shares of stock of any class or any other
securities or property, or to receive any other right, or
(2) any capital reorganization of the Company, any reclassification
or recapitalization of the capital stock of the Company or any transfer of
all or substantially all of the assets of the Company to or consolidation
or merger of the Company with or into any other Person, or
(3) any voluntary or involuntary dissolution, liquidation or
winding-up of the Company,
then and in each such event the Company will mail or cause to be mailed to
the Buyer, at least ten days prior to such record date, a notice specifying
(i) the date on which any such record is to be taken for the purpose of such
dividend, distribution or right, and stating the amount and character of such
dividend, distribution or right, (ii) the date on which any such
reorganization, reclassification, recapitalization, transfer, consolidation
or merger (to which the Company is a party and for which approval of any
stockholders of the Company is required, other than a consolidation or merger
in which the Company is the continuing corporation and that does not result
in any reclassification or change of the Common Stock outstanding),
dissolution, liquidation or winding-up is to take place, and the time, if any
is to be fixed, as of which the holders of record of Common Stock shall be
entitled to exchange their shares of Common Stock for securities or other
property deliverable on
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such reorganization, reclassification, recapitalization, transfer,
consolidation, merger, dissolution, liquidation or winding-up, and (iii) the
amount and character of any stock or other securities, or rights or options
with respect thereto, proposed to be issued or granted, the date of such
proposed issue or grant and the Persons or class of Persons to whom such
proposed issue or grant is to be offered or made. Such notice shall also
state that the action in question or the record date is subject to the
effectiveness of a registration statement under the Securities Act or a
favorable vote of stockholders if either is required.
(h) RESERVATION OF STOCK, ETC. The Company will at all times
reserve and keep available out of its authorized but unissued shares of
capital stock, solely for issuance and delivery under this Section 9, a
sufficient number of shares of Common Stock to effect the purchase in full by
the Buyer of the Purchasable Shares and the exercise, conversion or exchange
of any security of the Company exercisable for, convertible into,
exchangeable for or otherwise entitling the holder to acquire shares of
Common Stock, and if at any time the number of authorized but unissued shares
of Common Stock shall not be sufficient to effect such exercise, conversion
or exchange, the Company shall take such action as may be necessary to
increase its authorized but unissued shares of Common Stock to such number as
shall be sufficient for such purposes.
(i) NO TRANSFER. The rights of the Buyer under this Section 9 may
not be transferred without the consent of the Company, except by operation of
law.
(j) CERTAIN MATTERS. The Buyer acknowledges that the right to
purchase the Purchasable Shares hereunder is not a "security" for purposes of
the 1933 Act or the 1934 Act and that no "sale" of a security is being made
by reason of the provisions of this Section 9.
10. MISCELLANEOUS
(a) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
(b) HEADINGS. The headings, captions and footers of this
Agreement are for convenience of reference and shall not form part of, or
affect the interpretation of, this Agreement.
(c) SEVERABILITY. If any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement or the validity or enforceability of this
Agreement in any other jurisdiction.
(d) NOTICES. Any notices required or permitted to be given under
the terms of this Agreement shall be in writing and shall be sent by mail,
personal delivery, by telephone line
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facsimile transmission or courier and shall be effective five days after
being placed in the mail, if mailed, or upon receipt, if delivered
personally, by telephone line facsimile transmission or by courier, in each
case addressed to a party at such party's address (or telephone line
facsimile transmission number) shown in the introductory paragraph or on the
signature page of this Agreement or such other address (or telephone line
facsimile transmission number) as a party shall have provided by notice to
the other party in accordance with this provision. In the case of any notice
to the Company, such notice should be addressed to the Company at its address
shown in the introductory paragraph of this Agreement, Attention: Senior Vice
President, Finance (telephone line facsimile number (650) 369-5318), and a
copy shall also be given to: Brobeck, Phleger & Harrison LLP, Two
Embarcadero Place, 2200 Geng Road, Palo Alto, California 94303-0913,
Attention: Thomas Bevilacqua, Esq. (telephone line facsimile transmission
number (650) 496-2755), and in the case of any notice to the Buyer, a copy
shall be given to: _______________________________________________________
Attention: _____________ (telephone line facsimile transmission number (___)
___-____).
(e) COUNTERPARTS. This Agreement may be executed in counterparts
and by the parties hereto on separate counterparts, each of which shall be
deemed to be an original but all of which together shall constitute one and
the same agreement. A telephone line facsimile transmission of this
Agreement bearing a signature on behalf of a party hereto shall be legal and
binding on such party.
(f) ENTIRE AGREEMENT; BENEFIT. This Agreement, including the
Annexes, constitutes the entire agreement between the parties hereto with
respect to the subject matter hereof. There are no restrictions, promises,
warranties, or undertakings, other than those set forth or referred to herein
or therein or in the Indenture. This Agreement, including the Annexes,
supersedes all prior agreements and understandings between the parties hereto
with respect to the subject matter hereof. This Agreement and the terms and
provisions hereof are for the sole benefit of only the Company, the Buyer and
their respective successors and permitted assigns.
(g) WAIVER. Failure of any party to exercise any right or remedy
under this Agreement or otherwise, delay by a party in exercising such right
or remedy, or course of dealing between the parties, shall not operate as a
waiver thereof or an amendment hereof, nor shall any single or partial
exercise of any such right or power, or any abandonment or discontinuance of
steps to enforce such a right or power, preclude any other or further
exercise thereof or exercise of any other right or power.
(h) AMENDMENT. No amendment, modification, waiver, discharge or
termination of any provision of this Agreement nor consent to any departure
by the Buyer or the Company therefrom shall in any event be effective unless
the same shall be in writing and signed by the party to be charged with
enforcement, and then shall be effective only in the specific instance and
for the purpose for which given. No course of dealing between the parties
hereto shall operate
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as an amendment of this Agreement.
(i) FURTHER ASSURANCES. Each party to this Agreement will perform
any and all acts and execute any and all documents as may be necessary and
proper under the circumstances in order to accomplish the intents and
purposes of this Agreement and to carry out its provisions.
(j) ASSIGNMENT OF CERTAIN RIGHTS AND OBLIGATIONS. Unless the
Buyer shall have obtained the prior written consent of the Company, the
rights and obligations of the Buyer pursuant to Section 5 and Section 8 of
this Agreement may only be assigned to a Permitted Transferee and shall be
automatically assigned by the Buyer to any Permitted Transferee of all or any
portion of the Notes only if: (a) the Buyer agrees in writing with such
transferee or assignee to assign such rights, and a copy of such agreement is
furnished to the Company contemporary with such assignment, and (b) the
Company is, contemporaneously with such transfer or assignment, furnished
with notice of (i) the name and address of such transferee or assignee and
(ii) the securities with respect to which such rights and obligations are
being transferred or assigned. Upon any such transfer, the Company shall be
obligated to such Permitted Transferee to perform all of its covenants under
Section 5 and Section 8 as if such Permitted Transferee were the Buyer.
(k) EXPENSES. Whether or not the closing occurs, all expenses
incurred in connection with registrations, filings or qualifications pursuant
to this Agreement shall be paid by the Company, including, without
limitation, all registration, listing and qualifications fees, printers and
accounting fees and the fees and disbursements of counsel for the Company,
fees of the Trustee and counsel for the Trustee and fees of the Conversion
Agent but excluding (a) fees and expenses of investment bankers retained by
the Buyer, (b) brokerage commissions incurred by the Buyer and (c) fees and
disbursements of counsel for the Buyer. Except as provided in this Section
10(k), each of the Company and the Buyer shall bear its own expenses in
connection with this Agreement and the transactions contemplated hereby.
(l) TERMINATION. (1) The Buyer shall have the right to terminate
this Agreement by giving notice to the Company at any time at or prior to the
Closing Date if the closing shall not have occurred on a Closing Date on or
before February 4, 1998, other than solely by reason of a breach of this
Agreement by the Buyer. Any such termination shall be effective upon the
giving of notice thereof by the Buyer. Upon such termination, the Buyer
shall have no further obligation to the Company hereunder and the Company
shall remain liable for any breach of this Agreement or the other documents
contemplated hereby which occurred on or prior to the date of such
termination.
(2) The Company shall have the right to terminate this Agreement by
giving notice to the Buyer at any time prior to the Closing Date if the closing
shall not have occurred on a Closing Date on or before February 4, 1998, other
than solely by reason of a breach of this Agreement by the Company. Upon such
termination, neither the Company nor the Buyer shall
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have any further obligation one to the other hereunder.
(m) SURVIVAL. The respective representations, warranties,
covenants and agreements of the Company and the Buyer contained in this
Agreement and the documents delivered in connection with this Agreement shall
survive the execution and delivery of this Agreement and the Closing
hereunder and delivery of and payment for the Notes, and shall remain
operative and in full force and effect regardless of any investigation made
by or on behalf of the Buyer or any Person controlling or acting on behalf of
the Buyer or by the Company or any Person controlling or acting on behalf of
the Company.
(n) PRESS RELEASE, PUBLIC ANNOUNCEMENTS, ETC. The Company has
provided to the Buyer, and the Buyer has approved, a form of press release
proposed to be issued by the Company regarding this Agreement and the
transactions contemplated hereby. The Company and the Buyer shall have the
right to approve before issuance any other press releases or any other public
statements with respect to the transactions contemplated hereby; PROVIDED,
HOWEVER, that the Company shall be entitled, without the prior approval of
the Buyer, to make any press release or other public disclosure with respect
to such transactions as is required by applicable law and regulations
(although the Buyer shall be consulted by the Company in connection with any
such press release or other public disclosure prior to its release and shall
be provided with a copy thereof).
(o) CONSTRUCTION. The language used in this Agreement will be
deemed to be the language chosen by the parties to express their mutual
intent, and no rules of strict construction will be applied against any
party.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be
duly executed by their respective officers thereunto duly authorized as of
the date set forth above.
Principal Amount: $
Purchase Price: $
Purchasable Shares: $
Purchase Price: $
CYGNUS, INC.
By:
___________________________________
Name:
Title:
Date:
___________________________________
31.
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[NAME]
By:
___________________________________
Name:
Title:
Date:
___________________________________
Address:
Facsimile No.:
32.
